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Kuroda: Real Effective Yen Exchange Rate Unlikely to Fall

During a speech today, Bank of Japan Governor Kuroda said that the real effective rate of the yen was unlikely to fall. Furthermore, he warned against aggressive speculations for a rise in the dollar, declaring that a real rise in interest rates by the Fed would lead to a strengthening of the dollar. In the past, when the dollar has been at a significantly lower level than it currently is against the yen, Kuroda repeatedly welcomed this, saying that the weakening of the yen is good for the economy. The recent change of tone says something about how the central bank is no longer for the weakening of the yen, although it will temporarily increase inflationary pressures.

The dollar/yen skipped from 124.54 to 122.99 and later to 122.75 after Kuroda’s comments. It had been announced earlier that any rise in the pair above 120 would be unsustainable.

According to yesterday’s API data, US oil reserves have fallen by 6.7 million barrels, causing a growth in oil quotes to above 65 dollars for Brent. In the evening some statistics according to the US department of energy will be published, in which there’s also the expectation of the reserves falling.

From today’s announcements from the Reserve Bank of Australia, Glenn Stevens, it’s suffice to say that the central bank is open to further reductions in rates and a further cheapening of the Australian dollar is necessary. The Aussie/Yank pair fell from 0.7679 to 0.7643, after which it continued a growth to 0.7779. Stevens also announced that it will take some time before the RBA will consider putting its rates up.

Today some data was published which showed a fall in manufacturing production in the UK throughout April by 0.4% in comparison with March and a growth of 0.2% in comparison with the same period last year. The statistics have compounded worries that UK economic growth will not have sped up in the second quarter.

A rise in production was expected, although at a lower rate than the previous months. Today it’s worth having a look at the publication of UK GDP values for May, which is sure to give the pound/dollar something to fluctuate about. Having a listen to what the Bank of England’s Mark Carney has to say might also be worth your while.

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