Last quote by Junichi Ishikawa
Junichi Ishikawa quotes
Whether the latest bull phase by the dollar is real or not depends on how the various U.S. asset markets can co-exist with the prospects of a Fed hike. While it is plain to see that higher Treasury yields are pushing up the dollar, equities are also up. Dollar/yen has climbed above 104 amid lessened demand for the yen as the stock markets are holding up.
Hawkish views from Fed officials can prompt short covering in the dollar, but they are not sufficient enough to kick off an uptrend. This is because the markets now expect only one or two rate hikes this year, when at the end of 2015 they had expected up to four.
The dollar could suffer a sudden fall, with the Dow possibly falling any time now following days of successive record highs.
The dollar continues to benefit from the strength in U.S. equities, which have gone a head above their global peers and are attracting money thanks to high dividends, with strong earnings also helping. This has resulted in 'risk on', sustaining the dollar's rise against the yen.
The euro falling against the dollar shows the impact negative German bond yields are having. The markets have to brace for the European Union falling into dysfunction if Britain leaves.
A June U.S. rate hike is now out of the question and the focus is whether the Fed provides any hints of a July hike. There are no major U.S. indicators until the Fed's policy meeting next week, and the dollar is likely to remain bearish until then.
The yen gained as risk aversion overcame the Fed officials' hawkish views. Upward pressure on the yen was stronger due to weaker stocks and falling commodities.
Japan will host the G7 summit in May. It cannot afford to invite almost guaranteed criticism by intervening through yen-selling after it adopted negative interest rates.
The authorities also have to keep U.S. political developments in mind, as presidential hopefuls Trump and Clinton have both been critical of Japan's stance on currencies.
China risk adds a layer of support to the yen, which already looks to appreciate this year as Japan's current account surplus grows at a faster-than-expected pace.