Yen Rises More As Markets Await BoJ and FED Meeting

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Today’s trading session sees the yen rise sharply as Hong Kong equities continue their wild collapse. For the time being, the dollar is the second strongest currency, followed by the Swiss Franc. Commodity currencies, led by the Australian Dollar, are the weakest, but the Sterling isn’t far behind. This week, four central banks will meet. Traders may be more skeptical of FOMC policy decisions and economic estimates in particular.

While a tapering announcement is improbable, there is the possibility of some hawkish surprises. The Japanese yen is up against the US dollar and has moved away from the 110 level. The USD/JPY currency pair is currently trading at 109.39, down 0.45 percent on the day. This week sees a slew of central bank meetings, with the Federal Reserve and the Bank of Japan both holding meetings on Wednesday. The expectations for the two meetings are opposed.

The markets are focused on the FOMC, and any comments made by Fed members before the meeting will be plastered across the media, potentially moving the markets. Investors have been unable to pinpoint the exact timing of a taper, but there is rising anticipation that the Fed would suggest that reduction will begin at its November meeting. The US dollar is already on the rise ahead of the meeting, and even a hint of a November taper might help the greenback advance even higher. Investors will scrutinize the rate statement as well as the dot plot; if the Fed moves rate rise expectations ahead, the US dollar should rally sharply.

USDJPY: Yen May Be Supported by Policy Change

On September 29, Taro Kono, Fumio Kishida, Sanae Takaichi, and Seiko Noda will run for office, all promising to support the COVID-19’s crippled economy. Three of the four candidates have promised clear policies of some kind of cash handouts, but Taro Kono appears to be the most conservative, but he, too, is committed to supportive fiscal policy measures in the short term to help the economy recover from the covid shock.

As a result, it’s tempting to believe that policy continuance will result in less market volatility in the future. This may be true in the near term, but the current alterations could have medium- to long-term implications for the yen’s direction.

The USD/JPY pair moved south on Monday, after completing the last two days of the previous week in the positive position, as safe-haven flows dominated the financial markets. At the time of writing, the pair was trading at 109.39, down 0.45 percent for the day.

At the start of the week, the JPY is benefiting from the significant drop in key global equities indices. US market index futures are down between 1.8 and 1.5 percent, indicating a strong flight to safety. Furthermore, the benchmark 10-year US T-bond yield is down about 4%, putting extra pressure on the USD/JPY.