In the Tokyo market at the beginning of the week, the dollar / yen pair has risen to the upper 117 yen level without any particular adjustment. It seems that the market is conscious of putting on the 118 yen level. The US FOMC meeting will be held this week. The market has almost completely factored in a 0.25% rate hike. In response to the situation in Ukraine, the observation of a 0.5% rate hike has been sealed. However, from the next time onward, it has been pointed out that there is a possibility of a significant rate hike due to the need to deal with inflation depending on the situation in Ukraine.
Looking at the situation in Ukraine, there is still no movement to converge. Russia’s offensive extends to military installations near the Ukrainian-Polish border. The death of a US journalist was also reported near the capital Kyiv. The United States is strongly restraining China from providing assistance to Russia. Even today, the fourth ceasefire talks are expected to be held online, and there are voices in the market expecting an agreement, but the situation is not optimistic.
Under such circumstances, the stock market remains unstable. On the other hand, the concept of safe assets has also changed. US Treasuries were being sold, and the yield on 10-year bonds temporarily rose to the 2.05% level. In particular, the contrast between Japan, which has a strong stance of continuing easing, and the United States is clear. The dollar-yen pair is easy to buy because of the outlook for interest rate differentials.
Also, whether the yen exchange rate is a safe currency according to the theory of the past is becoming a little uncertain. It’s a risk that you don’t really feel when you’re in Tokyo, but Japan is adjacent to Russia across the sea. Seen from overseas, it would be a neighboring country of Russia. Some may be worried about whether geopolitical risks will ignite.
It seems that the EUR is buying from the expected value of the fourth ceasefire negotiations today. Personally, I think the expected value is low, but the market expectation seems to be high.
It is expected that the headline will continue to sway this week as well.