The yen fell by over 1% against the dollar on Tuesday morning, ending a five-day rally that had gained momentum following the Bank of Japan’s interest rate hike last week. By 9:58 a.m. in Tokyo, the yen had recovered some of its earlier losses and was down 0.6%, trading at 145.02.
On Monday, the yen’s sharp rise contributed to a significant decline in Japanese stocks, erasing their gains since the beginning of the year. However, Japanese equities began to rebound on Tuesday morning, supported by favorable technical indicators.
“Rising expectations for shares are leading to a reversal in yen buying driven by risk aversion,” said Keiichi Iguchi, a senior strategist at Resona Holdings Inc.
The yen has also found support from growing expectations that the Federal Reserve may cut interest rates as early as September, coupled with the anticipation of higher rates in Japan in the coming months.
The unwinding of global carry trades has further boosted the Japanese currency, causing significant ripples in global markets.
Big Take: $6.4 Trillion Wipeout Sparks Fears of ‘Great Unwind’
The recovery in the Nikkei 225 Stock Average and Topix accelerated throughout Tuesday morning, with both indices rising nearly 11%.
“The market may have overreacted in anticipating an inter-meeting cut from the Federal Reserve,” said Charu Chanana, head of currency strategy at Saxo Markets. “While equities in Japan might attract some dip buyers due to strong structural factors, the possibility of further rate hikes by the BOJ remains and could limit the gains.”
Yen Halts Five-Day Surge, Drops Amid Volatile Trading
The yen fell by over 1% against the dollar on Tuesday morning, ending a five-day rally that had gained momentum following the Bank of Japan’s interest rate hike last week. By 9:58 a.m. in Tokyo, the yen had recovered some of its earlier losses and was down 0.6%, trading at 145.02.
On Monday, the yen’s sharp rise contributed to a significant decline in Japanese stocks, erasing their gains since the beginning of the year. However, Japanese equities began to rebound on Tuesday morning, supported by favorable technical indicators.
“Rising expectations for shares are leading to a reversal in yen buying driven by risk aversion,” said Keiichi Iguchi, a senior strategist at Resona Holdings Inc.
The yen has also found support from growing expectations that the Federal Reserve may cut interest rates as early as September, coupled with the anticipation of higher rates in Japan in the coming months.
The unwinding of global carry trades has further boosted the Japanese currency, causing significant ripples in global markets.
Big Take: $6.4 Trillion Wipeout Sparks Fears of ‘Great Unwind’
The recovery in the Nikkei 225 Stock Average and Topix accelerated throughout Tuesday morning, with both indices rising nearly 11%.
“The market may have overreacted in anticipating an inter-meeting cut from the Federal Reserve,” said Charu Chanana, head of currency strategy at Saxo Markets. “While equities in Japan might attract some dip buyers due to strong structural factors, the possibility of further rate hikes by the BOJ remains and could limit the gains.”
