On Monday, the U.S. dollar rose against the yen despite what was thought to be another blast of Japanese intervention. However, a drop in Chinese markets took the shine off hopes that U.S. interest rate hikes would slow down in the future.
The dollar started out in a bullish mood and quickly went up to 149.70 yen. However, in just a few minutes, it fell all the way down to 145.28 yen. But traders didn’t seem to be scared, and in choppy trading, they brought the dollar back up to 148.90.
The Financial Times said that the Bank of Japan may have sold at least $30 billion on Friday to stop the weakening of the yen, which has caused import prices to rise sharply.
Related: Pakistan’s current dollar exchange rate as of October 22, 2022
Again, Japanese officials wouldn’t say for sure if they had stepped in, but the way prices moved strongly suggested that they had.
Any move to help the yen goes against the Bank of Japan’s super-easy policies and will put more pressure on it to stop controlling the yield curve at this week’s policy meeting.
Sterling also went up and down after the news that Boris Johnson was no longer running for prime minister.
That made it more likely that Rishi Sunak, a former finance minister and the market’s favourite candidate, would be elected and end the political uncertainty that was weighing on the pound, at least for a while.
As soon as the news came out, sterling went up almost a cent to $1.1402, but it couldn’t stay there and fell back down to $1.1307 as investors waited for more information about the contest.
Most stocks kept going up after they started going up late Friday night in New York. This was due to rumours that the Federal Reserve was discussing when to slow the pace of rate hikes and that its November meeting might show a step back.
The markets are still betting on a rise of 75 basis points next month, but bets on a similar move in December have decreased. The highest interest rate has also gone down, from over 5% early last week to around 4.87% now.
Rate hikes by the ECB and the Bank of Canada
In Asia, S&P 500 futures rose 0.1% and Nasdaq futures rose 0.2% simply because the Fed was expected to be less aggressive.Futures for the EUROSTOXX 50 went up 0.7%, and futures for the FTSE went up 0.1%.
The Nikkei in Japan went up 0.6% and the KOSPI in South Korea went up 0.9%, but the MSCI broadest index of Asia-Pacific shares outside of Japan went down 1.1% because Chinese stocks went down.
Chinese blue chips fell 1.7% as the value of the yuan continued to fall and Xi Jinping won a record-breaking third term as president by choosing a top government body full of loyalists.
The gross domestic product (GDP) data that was released late showed that China’s economy grew 3.9% in the third quarter, which was better than the 3.5% growth that was expected. However, retail sales only went up 2.5%, which was less than expected.
The markets are now waiting for the U.S. GDP report on Thursday and the core inflation report on the day after that. The economy is expected to have grown at an annualised rate of 2.1% in the third quarter, while the Atlanta Fed’s GDP Now estimate is up at 2.9%.
Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google’s parent company Alphabet (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN) will all report earnings, which will test how people feel.
This week, the European Central Bank will meet. Most people think that it will raise its rates by 75 basis points, but it is less clear if it will also say that it will do the same thing in December.
In a note, analysts at NatWest Markets said, “Even though we don’t expect any “dovish” policy signals, we still lean toward a lower rate path than what the markets are pricing in right now.”
Related: The US Dollar to Pakistani Rupee exchange rate on October 21, 2022
“We expect +50bp in December and +25bp at the beginning of 2023, for a peak of 2.25 percent,” they said. “There is more uncertainty about quantitative tightening (QT), where sales could start in the first quarter of 2023.”
At $0.9835, the euro was down a bit after briefly reaching $0.9899 earlier in the session.
At its meeting this week, the Bank of Canada is also likely to raise rates by 75 basis points.
U.S. 10-year Treasury yields went from a 15-year high of 4.337% on Friday to 4.16% on Monday. This is because there is a chance that the U.S. will slow down on raising interest rates. [US/]
Gold was pushed to the sidelines of commodity markets at $1,654 per ounce.[GOL/]
Oil prices gave up their early gains after weak news about Chinese demand. Brent fell 42 cents to $93.08 per barrel, and U.S. crude dropped 41 cents to $84.64 per barrel. [O/R]
