Yen intervention on the radar in sleepy start to the week
Auckland and Australia are on holiday today.
The antipodes are waking up to a slow start to the week with holidays in Auckland and Australia set to keep trading light as investors turn their mind to the prospect of Japan’s government intervening in currency markets after prime minister Sanae Takaichi warned of action on abnormal moves.
Chatter of potential yen intervention floated around currency markets on Friday when the Bank of Japan kept its benchmark rate on hold and governor Kazuo Ueda said he was willing to respond to the sharp rise in bond yields, while the greenback remained under pressure after US President Donald Trump’s back-and-forth on Greenland last week, with the White House now threatening Canada with tariffs over its neighbour’s plans to sign a free trade deal with China.
The Federal Reserve’s open market committee holds its first meeting of the year this week, with economists predicting the benchmark rate will stay on hold, while Australian inflation figures on Wednesday are seen as a key factor in whether the Reserve Bank of Australia will hike next month.
US corporate earnings season rolls on this week with Meta Platforms, Microsoft, Tesla and Apple due to report, with a mixed start to the slew of results so far.
Some currency
Japan’s yen remains on investors radars this week after talk of potential intervention injected itself into markets when Bank of Japan governor Kazuo Ueda said he was willing to respond to the sharp rise in interest rates after the central bank kept the benchmark rate unchanged on Friday. Prime minister Sanae Takaichi fuelled that speculation over the weekend, saying the government will take “all necessary measures to address speculative and highly abnormal movements” during a televised election debate.
The kiwi dollar fell to 92.65 yen at 7am in Auckland from 93.72 yen last week.
That was against a backdrop of a broadly weaker greenback after US President Donald Trump spent much of last week strongarming Europe to support his bid to acquire Greenland. The New Zealand dollar rose to 59.44 US cents at 7am in Auckland from 59.08 cents last week.
“It is clear that the market has been concerned by Trump’s antics regarding Greenland earlier in the week, giving reason for investors to revisit the risks of holding US dollar assets,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The ‘dollar debasement’ trade continues to percolate through the precious metals market, with gold prices approaching the US$5,000 mark and silver breaking up through US$100.”
Meanwhile, Trump upped the ante on Canada, threatening to impose a 100% tariff on the US neighbour over its plans to sign a free trade deal with China. Treasury secretary Scott Bessent reinforced the threat during an interview on ABC’s This Week programme, saying an import levy could be imposed if an agreement is reached and Canada becomes a place where cheap Chinese goods can enter the US supply chain.
Central banking
The Federal Reserve’s open market committee meets this week and is expected to keep the federal funds rate in a range of 3.5% and 3.75%, with the level of dissent a focus for economists.
US corporate earnings season continues with four of the Magnificent 7 megacap stocks due to report. Meta Platforms, Microsoft and Tesla are scheduled for Wednesday int eh US and Apple on Thursday.
Chipmaker Intel slumped 17% on Friday after reporting a bigger loss than analysts predicted, saying it didn’t predict the surge in demand from data centres.
About 13% of S&P500 companies have reported so far, with about three-quarters beating analysts estimates, albeit with smaller positive surprises than recent averages, according to FactSet analysis.
Stocks on Wall Street were mixed on Friday, with the Dow Jones Industrial Average falling 0.6%, led by declines for Goldman Sachs and Caterpillar, while the tech-heavy Nasdaq Composite increased 0.3%, with the likes of Nvidia on the green side of the ledger.
European stock markets were mixed as Germany’s DAX 30 increased 0.2%, while the UK’s FTSE 100 and France’s CAC 40 both dipped 0.1%.
Trading will be quiet in New Zealand with Auckland closed for the city’s anniversary holiday, while Australia Day will keep markets closed across the Tasman.
Australian futures are pointing to a 0.1% decline for the S&P/ASX 200 index when trading opens on Tuesday. Inflation figures across the Tasman on Wednesday are seen as a key indicator on whether the Reserve Bank of Australia will raise its target cash rate next month.
No major local data are scheduled for today.
Reporting by Paul McBeth. Image from Louie Nicolo Nimor on Unsplash.
