Looking Ahead to Next Year: Dollar Strength and Yen Weakness, Year-End Focus on Adjustments and Intervention Risks
Dollar Strength and Yen Weakness into Next Year
Post-Japan-U.S. Monetary Policy Developments
- BOJ: The Bank of Japan adopts a cautious approach to policy decisions, citing wage trends and policies under President-elect Trump.
- U.S.: Persistent inflation pressures and expectations of fewer rate cuts next year are gaining traction.
- USD/JPY: Movements are advancing with 160 yen in sight.
Year-End Considerations
Risk of Yen-Buying Intervention
- The Japanese government and BOJ may intervene to buy yen in thin markets.
- Sudden volatility is a frequent trigger, particularly during year-end holidays and low-volume trading periods.
Year-End Specific Flows and Adjustments
- December is a period prone to year-end and fiscal year-end flows.
- Be cautious of speculative moves and rebalancing activities amid low liquidity.
Trump Inauguration
- Around the January 20 inauguration, significant movements may occur in anticipation of new policies and market expectations.
Today’s Economic Events
Key Indicators
- Brazil’s Broad Consumer Price Index (IPCA) (December)
- Brazil Employment Data (November)
- U.S. Wholesale Inventories (November Preliminary)
Speeches and Events
- BOJ Government Bond Purchase Plan (January-March 2025)
- U.S. Weekly Crude Oil Inventory Report
- No scheduled speeches from major financial officials.
Trading Strategies
Focus on Key Currencies and Assets
- Given reduced liquidity, limit trades to USD/JPY, EUR/USD, and Bitcoin.
- For other currency pairs, beware of wider spreads and sudden volatility.
Basic Approach
- Prioritize a wait-and-see stance; for short-term trades, use reduced-risk positions.
- Exercise caution when dealing with sudden price movements.
Bitcoin
- Bitcoin tends to move independently and is less affected by reduced liquidity.
- Monitor for further upward potential in the year-end market.
Summary
Heading into the year-end and New Year period, the overarching trend of dollar strength and yen weakness remains intact, but reduced market liquidity poses significant risks.
Special attention should be paid to potential government or BOJ interventions and sudden market fluctuations.
During the short period before the Christmas holidays, focus on calm and disciplined trading. Avoid rushing, and use this week to prepare thoroughly for next year’s market outlook.
