The Japanese Yen (JPY) experienced a strong rebound against the US dollar today, reaching the 160 level early in the day and hitting its highest point since October 1986. However, it later pulled back to the 155 level against the US dollar. This sudden change in the currency market followed the unexpected decision by the Bank of Japan (BOJ) to maintain interest rates, defying market expectations.
The JPY’s sharp recovery, coupled with reports of Japanese banks aggressively selling the US dollar, is seen as a potential intervention by the Japanese government. In its recent monetary policy statement, the BOJ reaffirmed its commitment to purchasing bonds to support economic growth and revised its inflation forecasts upwards. Investors had been anticipating intervention from Japanese officials due to the JPY’s 34-year low and over 10% decline against the US dollar this year.
According to Reuters, Masato Kanda, Japan’s top foreign exchange diplomat, declined to comment on market speculation regarding Japan’s intervention in the forex market. Meanwhile, The Kobeissi Letter, a global capital market expert, highlighted the significance of a 2.5% currency fluctuation in a major global currency within minutes, underlining its potential impact on the global market. The timing of this event, shortly after the BOJ’s decision to maintain interest rates, further amplified its importance.
The weakening of the US dollar had a positive effect on the stock markets, with the US Dollar Index (DXY) dropping to 105.46 and US Treasury yields declining. Futures for major US stock indices, including the Dow Jones, S&P 500, and Nasdaq, showed signs of recovery. Similarly, Asian markets experienced an upward trend as investors largely disregarded the latest inflation report and focused instead on the upcoming monetary policy decision by the Federal Reserve (Fed) on May 1st.
The decline in the DXY raised hopes among crypto investors, potentially boosting positive sentiment for a market recovery. The US Treasury Department’s announcement that it will provide up to 1.4 trillion dollars in liquidity for the second quarter of 2024 was well-received by those holding risky assets. However, the cryptocurrency market remains volatile, with news of liquidations ahead of the Fed’s monetary policy decision and ongoing liquidations of long positions hindering market recovery.
According to Coinglass, Bitcoin (BTC) and Ethereum (ETH) witnessed significant liquidations in long positions amidst mixed signals from derivative markets. Recent data shows BTC trading at $62,241, while ETH is at $3,180.
Disclaimer: The information provided in this article should not be considered as investment advice. Investors should be aware of the high volatility and risk associated with cryptocurrencies and conduct their own research.