This week, the dollar has been on the rise, with a prevailing trend. The weak results of last week’s US employment statistics contributed to a selling pressure on the dollar, but it appears that a period of adjustment is underway. Additionally, there has been a weakening of the yen in recent days. The USD/JPY pair has again reached the 151 yen level, causing concerns about government and Bank of Japan intervention levels.
This week is situated between last week’s US employment statistics and next week’s highly anticipated US Consumer Price Index report. As a result, market conditions are characterized by adjustments in positions, and there is a diminished level of confidence in the correlation between the dollar and US bond yields. Market participants are looking for solid fundamental factors to guide their decisions.
Central bank officials’ statements are receiving significant attention in this context. US, UK, and Eurozone central bankers acknowledge the slowing pace of inflation but unanimously agree that it is premature to discuss rate cuts. Achieving the inflation target remains a distant goal, and maintaining the current high-interest rate environment is a top priority.
In contrast, the Bank of Japan, under Governor Kuroda, continues to maintain its accommodative stance. The adjustments to Yield Curve Control (YCC) are perceived as fine-tuning to sustain the easing policy. Although there have been some indications of a potential easing of the easing policy in the near future, the market has not let up on selling the yen. It was recently revealed that there was no foreign exchange intervention last month, and the rapid yen movement was attributed to market jitters. However, given the potential risks, it’s wise to remain prepared for periods of yen volatility.
Regarding economic indicators scheduled for release in the international markets ahead, we have South African Manufacturing Production for September, Mexico’s Consumer Price Index for October, US Initial Jobless Claims for the period from October 29 to November 4, and the Bank of Mexico’s Policy Interest Rate decision for November, among others. Unless US Initial Jobless Claims significantly deviate from market expectations, their impact on the market is likely to be relatively limited. Market consensus is around 218,000 claims, similar to the previous figure of 217,000.
The strategy continues to be to sell the USD. Currencies like GBP and NZD have gained strength, making GBP/USD and NZD/USD pairs worth watching. Additionally, Bitcoin remains a focus of interest.