The Japanese yen rose on Friday and is on track for its biggest weekly gain in four months against the dollar on rates that U.S. interest rates are nearing a peak after data showed that the world's largest economy unexpectedly contracted in the June quarter.
Futures markets predict that U.S. interest rates will peak by December of this year compared to June 2023 in early July, and the Federal Reserve will cut interest rates by 50 bps next year to support slowing growth.
The result of such a rapid decline in expectations of a rate hike was a weakening of the dollar against the yen. This week, the dollar fell by almost 2.5% against the Japanese currency, which is the largest weekly drop since the end of March.
Against the dollar, the yen rose 0.8% on Friday to 133.17 yen, hitting its highest level since mid-June.
The yen has been a major short instrument in trade with a widening interest rate differential between the United States and its global counterparts, with short rates on the yen despite the recent pullback exceeding historical averages of $5.4 billion. Dollars.
"The main impetus for the yen's rebound was the decline in US yields, reflecting a decrease in expectations of divergence in the policy of the Fed and the Bank of Japan," Mizuho strategists said in a daily note.
The gap between the yield on 10-year U.S. Treasuries and the equivalent Japanese national debt has narrowed by 70 bps since early June, as signs of slowing U.S. growth and rising interest rates pushed Treasury yields down.
On Friday, the U.S. dollar as a whole fell slightly in other countries, and the dollar index headed for the second consecutive weekly decline. It fell by 0.5% to 105.680, the lowest level since July 5.
However, risk appetite was limited as the euro struggled to hold above the $1.02 level on fears that the euro zone economy could go into recession by the end of the year.
On Friday, safe currencies, including the Swiss franc, were in demand.
Read more:
Tencent wants to develop an AI-enabled product like ChatGPT
Chinese EV start-up Zeekr achieves higher valuation than Xpeng
Dollar rises as economic clouds thicken
The yen rises on reports that the Japanese government has decided on a more flexible inflation target
Sterling rises amid weakening of the dollar
Gold sees weekly decline amid hawkish Fed signals
Toncoin Telegram (TON) rose by 17% due to the failure of competitor WhatsApp
Bank of America beat forecasts thanks to higher interest rates in higher interest rates than expected in bond trading
Oil is growing up to $ 90, since OPEC+ considers the possibility of reducing production
Sterling rises against the dollar amid lower inflation in the UK
Bitcoin fell below $20,000 to its lowest level since mid-July as investors dump risky assets
Stocks making the most pre-market moves: Lowe's, Target, TJX and more
Stocks with Biggest Premarket Moves: Twitter, Wynn Resorts, Las Vegas Sands and more
Gold continues to fall amid strengthening dollar, the focus of the views of central banks
European stocks decline as inflation unnerves markets
Oil recoups early losses and becomes positive, despite fears of recession
Gold falls amid approaching Fed rate decision