The Japanese yen drops on BOJ unchanged policy

The yen fell affected by statements from the Bank of Japan Governor

By Nadia Elbilassy | @Nadia Elbilassy | 11 April 2023

Midday Market update
  • The Bank of Japan confirms its commitment to the current monetary policy

  • Oil declines in the first sessions of the week

  • The dollar continues to rise after strong employment data

The yen falls after statements from the new Bank of Japan Governor

The Japanese yen saw a sharp decline against most major currencies at the start of the week as markets awaited statements from the new bank governor.

Investors' attention turned to the meeting of the new Bank of Japan governor, "Kazu Oida," and during his inauguration speech, he confirmed the Bank of Japan's adherence to flexible monetary policy.

Oida said, "The challenge we face is how to continue the monetary easing policy," adding that the current monetary incentives at the Bank of Japan helped Japan emerge from the contraction.

He also pointed out that interest rates cannot be raised significantly in Japan due to current conditions, emphasizing that the bank will do its utmost to stabilize prices and the financial system.

On the other hand, after the sharp decline of the Japanese yen against the US dollar, where it fell by more than 1% during yesterday's trading, the US dollar pair began trading today with a slight decline against its Japanese counterpart, with the pair trading near 133.35.

Oil is affected by the rise of the US dollar

The recent rise in oil prices was partly due to concerns over a potential supply shortage, as well as OPEC+ countries' decision to voluntarily cut their oil production starting in May and continuing until the end of the year. This additional production cut is in addition to the previous agreement made by OPEC+ members in October 2020 to limit their oil output to support the global oil market.

However, the fluctuations in oil prices after the initial rise can be attributed to a number of factors, including the strengthening of the US dollar, which can make oil and other commodities more expensive for buyers who use other currencies. Other factors include investors' concerns about increasing expectations of rising interest rates by the Federal Reserve, which could limit demand for oil.

WTI rose this morning trading near $80 per barrel. Meanwhile, Brent crude oil rose to trade at $84 per barrel.

The dollar continues to rise after employment data

Continuing its gains after strong employment data released last week, the US dollar index started trading this week on the rise against most currencies and commodities.

The data released at the end of last week showed that the US labor market added 236,000 jobs, while unemployment rates fell to 3.5%, compared to the previous reading, which recorded 3.6%.

US job data confirms that the labor market remains strong, which in turn boosted expectations that the Federal Reserve will raise interest rates again at its meeting next month.

In the second session of the week, the US dollar index began trading today with a slight decline, trading near 102 points.