Expat Exchange Rate Update – Yen (JPY) Weakens Past 101, Euro (EUR) Drops
In what has turned out to be a fairly volatile day for the currency market, the Yen fell beyond 101 per Dollar for the first time since July of this year as a better-than-expected US initial jobless claims report supported the case for the Federal Reserve tapering stimulus.
In its latest meeting the Bank of Japan opted to leave policy unaltered, but as deflation remains a serious concern and national growth is slowing, many industry experts are expecting the central bank to expand on its easing policy by the middle of next year – a significant contrast with expectations of the Fed reining bond-buying in.
The Yen’s movement prompted this response from currency strategist Brian Daingerfield; ‘The Dollar reacting positively towards the possibility of an earlier taper and yields moving higher are pushing Dollar-Yen higher. The yield differential is a key driver of Dollar-Yen.’
Meanwhile, the Euro went for a rocky ride during European trading. Although the common currency edged lower against its peers as services and manufacturing growth in the currency bloc slowed for a second month, it was able to recover losses after European Central Bank President Mario Draghi allayed fears regarding the use of negative interest rates.
Draghi stated; ‘I am of course aware that our rate cut raised some concerns. A protracted period of time of low rates creates the scene for risks in financial stability.Don’t try to infer anything from what I say, anything about the possibility of negative rates. This was discussed in the last monetary-policy meeting and there’s no more news since then. Let me make this clear.’
Any Euro gains were limited however by the news that consumer sentiment in the Eurozone unexpectedly declined this month.
The Pound broadly strengthened against its main rivals as the UK budget deficit narrowed and a measure of domestic factory orders surged to an 18-year high.
The Pound is currently trading against the US Dollar in the region of 1.6135
The Euro is currently trading against the Pound in the region of 0.8350