At the beginning of the Asian market on Thursday (December 22), the U.S. dollar index was hovering around 104.20. The U.S. dollar index rebounded slightly on Wednesday, following the trend of the dollar against the yen. The yen fell in choppy trading on Wednesday, giving up some of Tuesday's gains, when an unexpected policy change from the Bank of Japan sent the yen soaring nearly 4%.
The U.S. dollar rose 0.56% against the yen on Wednesday, which was basically an oversold rebound trend. The exchange rate plummeted 3.8% on the previous trading day, the largest single-day decline in 24 years, because the Bank of Japan decided on Tuesday to allow the 10-year government bond yield to fluctuate 50 basis points above and below the 0% target. The floating range is wider than the previous 25 basis points. John Doyle, vice president of trading at
MonexUSA, said: "I think yesterday's move was reasonable, but maybe a little too much, so it is natural for to pull back a little bit today."
Doyle said that given the magnitude of the dollar's move against the yen on Tuesday, traders should expect volatility in the currency pair.
Strategists attributed some of the volatility to poor liquidity ahead of the holidays.
Marc Chandler, chief market strategist at Bannockburn Forex, said: "The trend in the yen is excessive. Many people have suffered losses, and not many people want to enter the market immediately when liquidity is thin during the holiday season."
Chandler said: "I think the dollar has peaked. I don't think it will reach 150 (yen) anytime soon."
The U.S. dollar index rose 0.26% on Wednesday to close at 104.25, following the rebound of the dollar against the yen. The U.S. dollar index fell 0.56% on Tuesday.
The theme of 2022 is the strong US dollar, the Federal Reserve rapid interest rate hikes , and geopolitical heightened tensions, causing investors to seek currency hedging with less risk, pushing the US dollar to rise sharply.
The Bank of Japan has long been focused on restoring price growth to avoid the risk of deflation, and has been unique among major central banks this year. The Bank of Japan has maintained negative interest rates, while other central banks have aggressively raised interest rates to curb inflation and support their currencies against the dollar.
Sterling fell against the dollar on Wednesday as British public borrowing hit a record high in November, underscoring the challenges facing the British economy. The pound fell 0.8% against the dollar on Wednesday to close at $1.2085. It hit a new low in nearly three weeks at 1.2054.
The New Zealand dollar fell 0.79% against the US dollar on Wednesday, hitting a nearly three-week low at 0.6287. Australian dollar against US dollar rose 0.4% on Wednesday to close at 0.6706.
The U.S. dollar was little changed against the Canadian dollar on Wednesday, closing at 1.3610. Investors were uncertain whether the Bank of Canada would tighten policy further in January after previously released inflation data for November were mixed.
Important economic data and events on Thursday
Institutional views
ANZ : The New Zealand dollar will fluctuate slightly upwards against the US dollar
The New Zealand dollar has been strong in the past few months. Going forward, we expect continued volatility in NZD/USD as external forces impact its value. If New Zealand interest rates rise more than elsewhere, it will put upward pressure on the New Zealand dollar. Global risks remain the main factor affecting the value of the New Zealand dollar. In times of uncertainty, investors prefer the U.S. dollar, which is seen as a safe haven. As a result, the New Zealand dollar tends to weaken when global risks are higher. Currently, we expect the New Zealand dollar to appreciate slightly in the coming months, although it is already at the lower end of the range it has been operating in over the past decade.
Investment company Bespoke: The recent decline in the U.S. dollar against the yen may boost U.S. large-cap stocks
① Bespoke said that for multinational companies headquartered in the United States, a weak U.S. dollar helps reduce the price of purchasing their products in other currencies. A stronger U.S. dollar reduces the value of international sales when converted back into U.S. dollars. FactSet said earlier this year that S&P 500 companies generate more than 40% of their revenue from outside the United States.
②Bespoke wrote in the report, "Since 1972, there have been only a handful of instances where the U.S. dollar has fallen so sharply (or the yen has risen so sharply) in two months. As far as the S&P 500 is concerned, a weaker dollar against the yen tends to be good for U.S. stocks.
③ The company explained that a month after the dollar fell by double digits against the yen, the S&P 500 index rose 62% of the time. After 3 months, 6 months and 12 months, U.S. stocks were up 85% of the time. In addition, the median 3-month, 6-month and 12-month yields are 8.2%, 16.1% and 18.6% respectively, which is more than double the historical average. "Looking at the one-year time frame since 1978, there have been positive returns every time, and only two periods have seen percentage gains below double digits."
Société Générale : The dollar rally is over
① Kit Juckes, head of foreign exchange strategy at Societe Generale, said the dollar's second-largest rally since February 1985 has effectively ended.
② He said: "No matter how we beautify the world, the Federal Reserve is slowly moving towards the end of the interest rate hike cycle. The rate of interest rate hikes will become smaller and smaller, and eventually stop raising interest rates. This will be the end of the story."
This article comes from Huitong.com
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-