Yen resumes losses on interest rate gap concerns
The Japanese yen fell in Asian trade on Friday against a basket of major rivals, resuming losses after a short hiatus against the US dollar, and about to touch two-month lows once more amid concerns about the Japan-US interest rate gap.
A series of bearish remarks from Japanese officials reduced the odds of a third Japanese interest rate hike this year, while the odds of an aggressive US interest rate cut in November receded.
The Price
The USD/JPY pair rose 0.15% today to 148.79 yen per dollar, with a session-low at 148.40.
The yen rose 0.5% yesterday against the US dollar, marking the first profit in three days and moving away from two-month lows at 149.54 yen.
The yen also rebounded as US treasury yields stalled after negative US unemployment claims data.
Japanese Rates
A series of bearish remarks by new Japanese PM Shigeru Ishiba and several BOJ officials reduced the odds of an October interest rate hike by the Bank of Japan, in turn hurting the yen’s standing.
US Rates
Investors reduced the odds of aggressive interest rate cuts by the Federal Reserve this year, following strong US labor data.
The Federal Reserve’s September meeting minutes showed Fed Chair Jerome Powell faced resistance from some members on cutting rates by 50 basis points, with some preferring a smaller 0.25% cut.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in November stood at 85%, while the odds of no changes stood at 15%.
Now investors await crucial US consumer prices data later today for September, which will likely impact the USD/JPY standing.
Interest Rate Gap
The current Japan-US interest rate gap stands at 475 basis points, the lowest since early 2023, and will likely remain unchanged until the Federal Reserve’s November meeting.
Oil prices resume gains as traders monitor the Middle East
Oil prices rose in American trade on Thursday, resuming gains with US crude approaching two-month highs, while Brent neared 1-⅕ month highs.
Traders are monitoring developments in the Middle East, and the damage sustained in Florida due to Hurricane Milton, which overshadowed data that showed a surge in US crude stocks last week.
Prices
US crude rallied 2.2% today to $74.93 a barrel, with a session-low at $73.33.
Brent rallied 2% to $78.23 a barrel, with a session-low at $73.33.
On Wednesday, US crude lost 0.75%, the second such loss in a row, amid profit-taking off two-month highs at $78.44.
Brent fell 0.9% yesterday on profit-taking off 1-⅕ month highs at $81.12.
Middle East Tensions
The global energy markets are still on edge about Israel’s potential retaliatory response to Iran’s recent missile attack, with Tehran warning that it’s ready to launch thousands of rockets if necessary, threatening the outbreak of a wider war in the region.
Israel’s Defense minister said that any attack against Iran will be a precise knockout, and surprising.
Hurricane Milton
Traders are also monitoring the path of Hurricane Milton in Florida, the strongest in a 100 years there, amid concerns it might impact oil facilities in the region and disrupt infrastructure.
US Stocks
The Energy Information Administration reported a buildup of 5.8 million barrels in US crude stocks last week to 422.7 million barrels, while analysts expected an increase of 2 million barrels.
Gasoline stocks fell by 6.3 million barrels to 214.9 million barrels, while distillate stocks fell by 3.1 million barrels to 118.5 million barrels.
US Output
The EIA also reported an increase of 100 thousand bpd in US crude output to a record high of 13.4 million bpd.
Euro extends losses to two-month lows on the interest rate gap
Euro lost ground in European trade on Thursday on track for the second straight loss against the dollar, plumbing two-month losses, amid concerns about a wider eurozone-US interest rate gap.
The European Central Bank is now widely expected to cut interest rates next week, while the odds of a Federal Reserve interest rate cut in November receded.
Investors are now waiting for important US inflation data later today for September to gather more clues on the path ahead for monetary policies.
The Price
The EUR/USD fell 0.1% today to $1.0928, the lowest since August 13, with a session-high at $1.0946.
The euro fell 0.4% on Wednesday against the dollar as US treasury yields surged.
European Rates
Eurozone inflation slowed down to 3-⅕ year lows in September, as inflationary pressures on ECB policymakers recede.
ECB President Christine Lagarde said last week that recent developments bolster confidence that inflation will return to targets in time, which would reflect on the October 17 policy decision.
Right now, the odds of a 0.25% ECB interest rate cut in October rose from 80% to 95%.
US Policies
The Federal Reserve’s September meeting minutes showed Fed Chair Jerome Powell faced resistance from some members on cutting rates by 50 basis points, with some preferring a smaller 0.25% cut.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in November stood at 85%, while the odds of no changes stood at 15%.
Rate Gap
The current eurozone-US interest rate gap stands at 135 basis points, and could expand to 160 basis points in favor of the US in October, in turn pressuring the common currency.
Yen extends losses to two-month lows on US yields
The Japanese yen fell on Thursday against a basket of major rivals, and extended the losses for the third straight session against the US dollar, plumbing two-month lows and about to trade below 150 yen as long-term US treasury yields rally.
Investors reduced the odds of multiple Fed rate cuts this year after a series of strong US labor data and the Fed’s last meeting minutes.
Now investors await mainline US inflation data for September later today, which will help determine the likely path ahead for US monetary policies.
The Price
The USD/JPY rose 0.2% today to 149.54 yen per dollar, the highest since August 2, with a session-low at $148.99.
The yen lost 0.75% on Wednesday against the dollar, after the Fed’s last meeting minutes showed divisions among members on the appropriate pace of rate cuts.
Japanese Rates
A series of bearish remarks by new Japanese PM Shigeru Ishiba and several BOJ officials reduced the odds of an October interest rate hike by the Bank of Japan, in turn hurting the yen’s standing.
US Yields
US 10-year treasury yields are trading near three-month highs at 3.078%, in turn boosting the greenback.
The gains come after investors reduced the odds of aggressive interest rate cuts by the Federal Reserve this year, following strong US labor data.
The Federal Reserve’s September meeting minutes showed Fed Chair Jerome Powell faced resistance from some members on cutting rates by 50 basis points, with some preferring a smaller 0.25% cut.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in November stood at 85%, while the odds of no changes stood at 15%.
Now investors await crucial US consumer prices data later today for September, which will likely impact the USD/JPY standing.