Amidst the fervor of the Nikkei hitting a record high, the USD/JPY exchange rate remained stagnant around 150 yen, trading in the range of 150.21 to 150.46. It seems trapped at familiar levels, despite the bullish sentiment in the stock market.
Meanwhile, observing the Dollar Index, a downward trend seems to be gradually emerging. This week, there has been notable strength in pairs like EUR/USD, GBP/USD, and particularly NZD/USD. The stagnation in the USD/JPY exchange rate reflects the rise in cross-yen pairs, indicating a trend of a weaker dollar and stronger yen.
The yen’s strength can be attributed to risk appetite, such as the surge in global semiconductor demand, symbolized by Nvidia’s strong earnings, which likely influenced the record high in the Nikkei today. Additionally, while Bank of Japan Governor Kuroda acknowledged a shift from deflation to inflation, he stated that even if negative interest rates are lifted, easing policies would continue, making it difficult for interest rate differentials to narrow between Japan and other countries like the US or Europe.
Regarding the weakening of the US dollar, economic indicators in the US are showing mixed signals, making it uncertain when the rate cut might begin. In the absence of decisive factors, factors such as speculation about additional rate hikes in New Zealand and favorable sentiment towards the Chinese yuan due to stock market and real estate measures contribute to the weakening of the dollar.
Whether the USD/JPY exchange rate, which showed no significant movement, can break out in the subsequent overseas market remains to be seen. It’s advisable to watch carefully ahead of tomorrow’s holiday in Japan.
Attention is drawn to the movement of the US dollar after the US Manufacturing PMI at 23:45. If there’s a trend of USD selling, it might be worth following.
