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Global FX & Economics: Yen-maggedon
Jul 26, 2024
Arindam Sandilya and Patrick Locke are Global FX strategy experts, while Ben Shatil focuses on Economic & Policy research. They delve into the yen's recent rise and its implications for upcoming BOJ and Fed meetings. The conversation highlights contrasting views on potential rate hikes, exploring their expected impact on the yen’s value. Geopolitical influences and market dynamics, including retail flows and political events, shape the discussion. As they navigate economic uncertainty, they also consider how Fed decisions may further affect global currencies.
20:49
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Quick takeaways
- The yen's recent appreciation signals a rare market shift influenced by declining US tech stocks and broader risk-off sentiment.
- Upcoming Bank of Japan policy changes, including rate hikes and reduced bond purchases, are expected to influence global currency dynamics.
Deep dives
Yen Appreciation Dynamics
Recent movements in currency markets have highlighted a significant appreciation of the yen, exceeding 5% in just two weeks. This shift is primarily attributed to a broader unwinding of FX carry trades, exacerbated by the decline of US tech stocks and other risk assets, indicating a classic risk-off sentiment in the market. Historically, such rapid appreciation has been rare and suggests that it may soon stabilize after reaching substantial highs, especially given the current widening policy rate differentials between the US and Japan. Analysts indicate that while the abrupt drawdown in dollar-yen might still evolve, it is important to recognize that previous price action may not be easily replicated after such significant technical shifts.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode