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September 18th - Nikkei futures extended gains as the yen weakened after the Bank of Japan raised its policy rate by 25 basis points to 1.25%, a move widely expected. The Bank of Japan stated that underlying inflation is approaching its 2% target and that it will closely monitor Middle East conflicts, the yens exchange rate, and demand for artificial intelligence. Investors are now focused on Governor Kazuo Uedas press conference later on Friday for clues about the pace of future rate hikes.Following the Bank of Japans interest rate hike, gains in benchmark 10-year Japanese government bond futures narrowed, with the latest increase being 0.22 yen.At the close of the morning session, most domestic futures contracts declined, with SC crude oil falling over 8%, coking coal over 6%, coke nearly 5%, bottled chip nearly 4%, and paraxylene, staple fiber, PTA, and polyvinyl chloride (PVC) all falling over 3%. On the upside, container shipping to Europe rose nearly 3%, Shanghai silver rose over 2%, Shanghai lead and international copper rose nearly 2%, and apples, Shanghai zinc, Shanghai copper, and Shanghai tin rose over 1%.On September 18th, Goldman Sachs maintained its year-end gold price forecast of $5,400/oz. Goldman Sachs stated that while the latest US interest rate hike may slow golds rise, it will not change its long-term bullish outlook. In its report, Goldman Sachs expects "the impact of tighter monetary policy to primarily manifest as a slowdown in the short-term appreciation path of gold, rather than a decline in the final gold price"; the continued diversification of reserves by central banks remains the main structural driver for its bullish outlook on gold. Goldman Sachs pointed out that if the Federal Reserve adopts a more hawkish policy, gold may experience a more significant correction. If the Fed raises interest rates three more times this year and signals further increases in final interest rates, gold prices could fall to around $4,070/oz; however, with central banks continuing to purchase gold to support the market, gold prices are expected to rebound to around $4,200/oz by the end of 2026.According to data from the National Bureau of Statistics, Chinas raw coal output in August 2026 was 361.823 million tons, a year-on-year decrease of 7.7%; the cumulative output from January to August was 3064.427 million tons, a year-on-year decrease of 3.3%. By province, the cumulative year-on-year changes in raw coal output from January to August were 3.3% for Inner Mongolia, 12.5% for Shanxi, and 3.8% for Shaanxi.

As the USD/JPY currency pair nears 137.00, the policy gulf between the Fed and the BOJ widens

Alina Haynes

Jul 25, 2022 11:43

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The US dollar pushed higher against the Japanese yen on Wednesday as investors gambled on a wider policy gulf between the Federal Reserve and the Bank of Japan. Since a small rebound around 136.00 on Friday, the asst has been making steady progress toward the pivotal level of 137.00.

 

On Wednesday, the Fed is likely to raise interest rates to 2.5 percent from their current level of 1.75%. Fed Chair Jerome Powell may announce a rate hike of 75 basis points to combat inflation (bps). At one point, when price pressures were in the double digits, the likelihood of a rate hike of even 1 percent was widely considered a certainty. Long-term inflation expectations fell to 2.8% in July from 3.1% in June, and Wall Street profit growth was weak, forcing the Fed to delay an increase in interest rates.

 

Meanwhile, last week's release of Japan's Consumer Price Index gave hope to those who buy the yen (CPI). After being reported at 2.5%, the National CPI has been revised down to 2.4%. Although core CPI rose from 0.8% to 1.0% since the last report. As long as food and energy costs stayed over 2 percent, the BOJ remained worried. Officials at the Bank of Japan (BOJ) are likely to be pleased with the recent uptick in demand for durable goods.

 

The increasing core CPI in Japan has little bearing on whether or not BOJ Governor Haruhiko Kuroda would make a hawkish remark. The Bank of Japan (BOJ) has promised to keep pumping money into the economy and to sustain its dovish tone.