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December 3rd - Data shows that the UK and Japan are responding to investor demand by increasing short-term borrowing. This strategic shift reduces government interest payments but also exposes them to potential high-cost interest rate volatility when rolling over debt. This year, the UK drastically reduced its sales of long-term bonds to a record low and is now considering expanding its ultra-short-term note market. In Japan, the government is heeding calls to increase short-term debt issuance after a sell-off in long-term bonds. "The risk is that if interest rates rise, your interest payments could suddenly increase dramatically," said Evelyne, a strategist at Mizuho Securities. These increases also reflect inflationary pressures and weakening demand for long-term debt from traditional buyers. For decades, UK income-generating pension funds have purchased long-term bonds to match their liabilities, allowing the UK to extend the average maturity of its bond issuances far beyond its peers. Now, many of these programs are fading.The yield on Japans 30-year government bonds rose 5 basis points to 3.425%, a record high.The yield on Japans 40-year government bonds rose 5 basis points to 3.735%.December 3rd, Futures.com analysts latest view: Crude oil prices have fallen in recent intraday trading. This is influenced by the short-term movement along a minor bearish trendline, indicating that negative technical pressure remains. Simultaneously, prices have been impacted by the previously formed "rising wedge" pattern, considered a reversal signal indicating weakening bullish momentum and increasing the likelihood of a continuation of the bearish trend. The Relative Strength Index (RSI) also shows a persistently negative signal. This weakness, coupled with oil prices remaining below the EMA50 (50-day exponential moving average), suggests a lack of dynamic support to reinforce recent recovery opportunities, thus confirming the continued existence of these pressures.December 3rd, Futures.com analysts latest view: Gold is relying on strong dynamic support, with its price trading above the EMA50 (50-day exponential moving average). Furthermore, the dominant short-term uptrend and the continued movement of gold prices along the support trendline provide a solid foundation that could help it reach new resistance levels in the near term.

USD/JPY falls to a two-month low at 131.50 owing to decreasing rates and recession concerns

Daniel Rogers

Aug 02, 2022 15:11

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During Tuesday's Asian session, USD/JPY bears hold dominance at the lowest levels in eight weeks as the pair flirts with the 131.50 barrier. Recent weakening in the pair may be linked to negative rates and recent good news on Japan, not to mention inconsistent Fed and China-related rhetoric.

 

US 10-year Treasury rates touched a four-month low of roughly 2.58 percent the day previous, as US economic data heightened concerns of a slump. As traders awaited the announcement of vital US employment numbers for July on Friday, the dollar dropped. In spite of this, the US Dollar Index (DXY) plummeted to a new monthly low before bouncing off 105.25 on Monday.

 

In July, the US ISM Manufacturing PMI fell to its lowest level since January 2020, as the activity index fell from 53.0 to 52.8. However, the actual figures outperformed the market projection of 52.0. Additionally, final readings of the US S&P Manufacturing PMI dipped below early predictions of 52.3 to 52.2, compared to 52.7 earlier. In addition, Germany's Retail Sales plummeted 8.8 percent year-over-year in June, compared to a market forecast of -8.0 percent and a prior decrease of -3.6 percent.

 

It should be remembered that the second straight quarterly contraction in US Gross Domestic Product (GDP) caused a "technical recession" and weighed on the US dollar throughout the preceding week. Fed Chair Jerome Powell's indirect warnings that the hawks are losing momentum were in the same tone.

 

On a separate page, Reuters claims three sources familiar with the issue as claiming that US House of Representatives Speaker Nancy Pelosi was slated to visit Taiwan on Tuesday, despite Chinese vows to never "sit idly by" if she made the trip to the self-governed island claimed by Beijing.

 

At home, speculations of an increase in Japanese salaries and challenges to the Bank of Japan's (BOJ) cheap money policies appeared to have sunk the USD/JPY exchange rate, probably due to widespread inflation anxieties. Recent estimates from Nikkei show that the average minimum wage in Japan will climb by a record 3,3 percent in the fiscal year ending in March 2023. The newspaper also noted, "A Japanese panel is aiming to enhance the average minimum wage by 31 yen."

 

Wall Street concluded with minor losses, but 10-year Treasury rates struck a four-month low of approximately 2.58 percent. In spite of this, as of press time, the S&P 500 Futures indicate moderate losses of around 4,120.

 

In the near future, the words of Chicago Fed President Charles L. Evans and Federal Reserve Bank of St. Louis President James Bullard will impact the course of the USD/JPY.


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