Investors grew cautious on the announcement of the Prime Minister Shinzo Abe resignation while the Japanese yen rose after the news.
Japanese stocks tumbled and the safe-haven yen erased some recent losses overnight when Abe resignation was reported. Abe was the nation’s longest-serving prime minister. The Japanese Prime Minister has resigned due to worsening health reasons.
Sweeping to power in late 2012, Abe deployed his three arrows of Abenomics: large-scale monetary easing, fiscal spending and structural reforms.
The yen, which had fallen to a two-week low of 106.945 yen per U.S. dollar, strengthened after the news. Investors considerate the possibility of a shift away from Abe’s expansionary economic policy – “Abenomics”.
The Japanese strengthened to as much as 105.5 by 0933 GMT. It then eased slightly and was at 105.685 by 1009 GMT.
At the virtual Jackson Hole conference, Fed Chair said the U.S. central bank would seek to keep inflation at 2%, on average. Market participants expect that this means the current ultra-low rates will stay lower for longer.
The Fed has cut interest rates to near zero and introduced unparalleled measures to stimulate the coronavirus-hit economy. The U.S. Central Bank has started bond-buying and approved a massive lending programme. Its balance sheet has expanded by as much as $3 trillion since the start of the pandemic. This is far more than that of the European Central Bank and Bank of Japan.
German Chancellor Merkel said the coronavirus pandemic would make things more difficult in the coming months and over the winter. Also, she said she would work with the European Parliament so that the EU recovery fund can be launched next year.
START TRADINGForex – Abe resignation news sends Yen higher
Currency markets were broadly pro-risk. Jerome Powell’s speech steered expectations of lower interest rates for longer.
The dollar index was at 92.425, down 0.6% on the day, having fallen even further than during the initial sell-off on Thursday.
The dollar was down around 0.8% versus the yen since New York’s close.
The New Zealand dollar rose to new two-week highs versus the U.S. dollar.
The Australian dollar rose to its highest since December 2018.
As the dollar weakened, the euro rose to as high as $1.192 at 0912 GMT. The single currency seemed little affected by weakening consumer morale in Germany.
Sterling touched an eight-month high versus the U.S. dollar purely on the greenback’s weakness. Against the euro, the pound remained relatively steady.
The pound was last trading hands at $1.3276, up 0.6% on the day. Versus the euro, it stood still at 89.72 pence, down 0.2% on the day.
Oil prices edged lower on Friday. Storm Laura passed the heart of the U.S. oil industry without causing any widespread damage to refineries. Brent crude futures for October, set to expire on Friday, was down 7 cents to $44.99 a barrel by 1154 GMT. WTI crude futures were down 3 cents to $43.01 a barrel.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money