What impact will this have on the US dollar, yuan, yen, and rupiah? The US dollar has strengthened once again after experiencing a slight increase following previous losses due to speculation about the latest interest rate changes by the US central bank this year. Meanwhile, it is noted that the Yuan and Yen are weakening further.
The Yuan overseas has been weakening from its highest level in over three months last week. This currency has been supported by expectations of further policy stimulus from China to support its economy.
On the other hand, the Yen is also weakening towards the 155 per US dollar level and maintaining a high risk of intervention from Tokyo.
The Yen last saw a slight change at 154.75 per US dollar, moving away from its peak of 151.86 last week due to alleged intervention by Japanese authorities to support the currency depreciation.
Analysts suggest that any intervention from Tokyo will only provide temporary relief for the Yen, considering the significant interest rate difference between the US and Japan.
Bank of Japan Governor Kazuo Ueda also stated on Wednesday (8/5/2024) that the central bank will assess the impact of the Yen movement on inflation in guiding monetary policy.
The country's Finance Minister, Shunichi Suzuki, reiterated warnings that authorities are ready to respond to highly volatile movements in the foreign exchange market.
"If we see a sharp and sudden increase in the US dollar/yen, then I expect them to enter the market to support the Yen. However, if we continue to see gradual increases, I doubt they will participate, but there are certainly risks," said currency strategist at the Commonwealth Bank of Australia, Carol Kong, as reported by Reuters on Wednesday (8/5).
Federal Reserve Officials' Comments
Previously, Federal Reserve Bank of Minneapolis President Neel Kashkari stated on Tuesday (7/5) that it is too early to declare that inflation has stopped.
This does not significantly affect market expectations for interest rate cuts.
Furthermore, Federal Reserve Bank of Richmond President Thomas Barkin on Monday (6/5) also predicted that high interest rates would slow down the economy and lower inflation to the central bank target. However, he believes that the full impact of these policies has not yet been seen.
Analysts then predict that the central bank will consider options to lower interest rates in early June 2024. As for the local currency, based on Bloomberg data, the Rupiah has weakened by -0.26% against the dollar to Rp16,088.5 at 09:17 WIB.
The Yen was also observed weakening by -0.29% against the dollar at 09:17 WIB at the level of 155.1400. The Yuan also depreciated against the greenback by -0.08% at 09:18 WIB at 7.2241.
In conclusion, the Federal Reserve's comments on future interest rate changes have had differing impacts on various currencies such as the US dollar, Yuan, Yen, and Rupiah.
Market analysts are closely monitoring these developments to anticipate potential interventions and adjustments in monetary policies. The professional tone of voice throughout the response emphasizes the importance of understanding and observing the dynamics of the global foreign exchange market.
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