ACTV - Week Ahead: Politics Economics And The Yen
2024-06-22 08:45:00 ET
Summary
- Central banks in Australia and Norway resisted rate cuts, leading to currency appreciation, while New Zealand's central bank faced skepticism from investors.
- The Bank of Canada, perceived as dovish, saw the Canadian dollar strengthen despite expectations of rate cuts.
- The Japanese yen weakened as the US dollar rose, with the Bank of Japan considering reducing bond purchases and facing concerns about intervention.
The relationship between interest rate expectations and the foreign exchange levels is more complicated than many textbooks or conventional wisdom allows. Australia's and Norway's central banks pushed against rate cuts this year, and their currencies were rewarded. The Reserve Bank of New Zealand said more or less the same thing, but investors are less sanguine and took the New Zealand dollar down as much as it took the Australian dollar higher.
The Bank of Canada is perceived to be one of the most dovish G10 central banks. The market expects at least two more cuts to be delivered this year. Yet, the Canadian dollar was the third strongest G10 currency last week, appreciating by about 0.2% for the second consecutive week. That the Swiss franc was weak, losing 0.4%, is understandable after the SNB surprised many with its second rate cut....
Week Ahead: Politics, Economics, And The Yen