There were a series of important monetary policy meetings this week. The most noticeable was the US FOMC. Reflecting the upside of the US consumer price index last week, the market has factored in a 0.75 percentage point hike in advance. As a result, the interest rate was raised by 0.75 percentage points. However, the dollar buying has been adjusted by Chair Powell saying that 0.75% is unusual. Nevertheless, in the money market, the next July’s 0.75% rate hike is predominant.
The surprise was the Swiss Central Bank. Contrary to market deferment expectations, it announced a 0.50 percentage point rate hike. The Swiss franc has skyrocketed with unexpected results, albeit with negative interest rates as before. As the stock market fell due to a negative surprise, the dollar and yen strengthened in the foreign exchange market.
As expected, the British central bank raised interest rates by 0.25 percentage points. It was the fifth consecutive rate hike. The vote split was 6 to 3 as in the previous time, and the negative vote was an allegation of a 0.50 percentage point rate hike. After reacting with the pound sterling, the pound sterling is rebounding with the dollar selling pressure.
And today’s BOJ decision meeting. Although there were speculations of fine-tuning in advance, as expected, the continuation of strong conventional mitigation measures was announced. The dollar-yen pair rose instantly from the mid-133 yen level at the time of the announcement to the mid-134 yen level, and then fell sharply to the 132-yen level after a while. Then, it settled down to trading at a level of 134 yen. There was a view that the statement that “it is necessary to pay close attention to the trends in the financial and foreign exchange markets and their impact on the Japanese economy and prices” as a risk factor led to the reaction of the yen’s appreciation.
Besides that, the ECB held an extraordinary meeting. It was urgent to respond to the sharp drop in bonds of Southern European countries such as Italian bonds (rising yield) and the sharp widening of the yield gap with German bonds. As the first measure against fragmentation, the flexibility of PEPP reinvestment was announced. It has been announced that new measures will be formulated in the future.
At this week’s series of monetary policy meetings, all the actors were dressed up. In particular, for the dollar-yen exchange rate, the basic scenario for widening the interest rate differential between Japan and the United States will be finalized. To be honest, it is thought that the movement of the dollar-yen exchange rate’s upside try will resume.
Each currency showed quite volatile price movements this week. Today is the weekend ahead, and it looks like it will be a break for the tired market. However, there is a possibility that the market will continue to be rough due to position adjustments of short-term sources, and it may be difficult to develop the market.
While the world is moving to raise interest rates, only the Bank of Japan is continuing easing. This is an unthinkable situation other than the depreciation of the Japanese yen. Japanese yen will continue to be sold in the future.
Today, we are selling Japanese yen in combination with the CHF, which announced a rate hike the other day.
The position is only to buy CHFJPY.
