- Key Points:
The yen remains weak against both the euro and the dollar as Japan's new Prime Minister favors low interest rates, prompting speculation on future monetary policy.
The Australian dollar has strengthened following positive employment data, diminishing expectations for near-term rate cuts.
Currency markets may experience fluctuations soon due to anticipated economic data releases linked to an imminent end to the U.S. government shutdown.
The Japanese yen lingered near record lows against the euro and a nine-month low against the U.S. dollar on Thursday, following remarks from the country's new Prime Minister Sanae Takaichi, who expressed a preference for the Bank of Japan (BOJ) to maintain low interest rates. This positions the yen at 179.32 per euro and 154.82 per dollar, with a prior dip to 155.05 against the dollar marking its weakest level since early February.
In Australia, the local currency surged to a two-week high after data revealed a sharper decline in the unemployment rate than anticipated, alleviating concerns over potential rate cuts. The Australian dollar rose 0.3% to $0.6559, briefly reaching $0.6563, its highest since October 30th.
Investors are bracing for currency market volatility as the U.S. government shutdown approaches resolution, which is expected to lead to the release of delayed economic indicators. However, the White House indicated that jobs and consumer price reports for October may not be made public.
Prime Minister Takaichi has emphasized the importance of stable interest rates and has requested regular updates from BOJ Governor Kazuo Ueda to ensure close coordination with the government’s Council on Economic and Fiscal Policy. Meanwhile, Finance Minister Satsuki Katayama highlighted her concerns about yen depreciation as it neared 155 per dollar, warning against "one-sided and rapid movements" in currency markets.
Analysts are closely watching potential BOJ policy shifts, as a weak yen could prompt a rate hike next month. Current market assessments suggest a 24% likelihood of a modest quarter-point increase in December, rising to 46% for January. "The yen’s weakness is likely making the government increasingly nervous," remarked Norihiro Yamaguchi, an economist with Oxford Economics.
In parallel, Australian traders are assigning a mere 16% chance for a rate cut in December, following positive labor market trends. Data released on Thursday indicated robust employment growth in October, with an increase in full-time positions that reduced the unemployment rate from a four-year high, alleviating fears of a significant slowdown in the labor market. A senior Australian central banker noted that debates are intensifying over whether the current cash rate of 3.6% remains sufficiently restrictive to effectively control inflation—an issue critical for future monetary policy considerations.
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