In early trading in Europe on Friday, the Japanese yen, which is seen as a safe haven after the shooting of former Japanese Prime Minister Shinzo Abe, was in high demand. This made the U.S. dollar go down a little bit.
At 2:55 a.m. ET (6:55 a.m. GMT), the Dollar Index, which compares the dollar to a basket of six other currencies, was down 0.1% to 106.895. This is still close to a 20-year high.
After hearing that Abe, Japan’s longest-serving prime minister, was shot while campaigning for a parliamentary election on Friday, foreign exchange traders rushed to buy the Japanese yen, which is known as a safe haven for people who don’t like to take risks. As a result, the USD/JPY fell 0.3 percent to 135.63.Abe was said to be in a very bad state.
On Sunday, Japan will hold elections for the upper house. Traders have been thinking about what a possible change in policy support for the central bank would mean, but any effects on the market are likely to be short-term.
The euro is the only currency that is more important in figuring out the dollar index than the yen, and the strength of the yen has made the index go down on Friday. Still, the index’s losses are small because the Federal Reserve is aggressively tightening monetary policy. The minutes from the central bank’s most recent meeting show that more hikes are on the way.
In a note, analysts at ING said, “Concerns about downside risks to growth were mentioned very little in the minutes, and the Fed’s risk management approach is clearly in favour of front-loaded tightening on the risk that inflation is more persistent than expected.”
St. Louis Fed President James Bullard agreed on Thursday that tighter policies are needed to stop prices from going up too much, but they also said that the U.S. might still be able to avoid a recession.
Later in the session, the latest U.S. jobs report will be released. It is expected to show that the number of Americans with paid jobs went up slightly in June, but not as much as it did in May.
Investors are worried that a Russian-caused energy crisis could push Europe into a recession, so EUR/USD stayed flat at 1.0159 and was close to a 20-year low.
Christine Lagarde, who is in charge of the European Central Bank, will talk about the risks facing the world economy later in the session. This speech will be carefully analysed to find out what the central bank is thinking, since it is expected to raise interest rates later this month, but growth in the region seems to be slowing.
“One interesting thing about how global growth has been re-priced over the past few weeks is that the ECB’s tightening cycle has been re-priced lower than the Fed’s,” ING said.
GBP/USD dropped 0.2 percent to 1.2002, giving back some of Thursday’s gains. This happened after Prime Minister Boris Johnson resigned, ending uncertainty about his future. This move could end the political stalemate that has been going on lately, but the country still has to deal with problems like high inflation, rising interest rates, and slowing growth.
The USD/HUF fell 0.2 percent to 395.31, while the forint rose after the National Bank of Hungary increased its key one-week deposit rate by 200 basis points to 9.75 percent on Thursday. This was the highest rate in a decade.
At 4.7065, USD/PLN was mostly flat after Poland’s central bank raised interest rates by 50 basis points on Thursday. This was the 10th consecutive rate increase, but it was still less than the 75 basis point increase that was expected.
Both Hungary and Poland are trying to deal with rising prices and slowing growth, but they also need to strengthen their currencies to ease price pressures.
