Bank of Japan shocks Forex Market
20 December 2022
Tuesday was supposed to be a quiet day just as the whole pre-Christmas week, but BoJ’s Kuroda had other plans in mind. The Bank of Japan left the market gobsmacked with its policy change that sent the Yen soaring. The Bank of Japan announced an unscheduled bond buying operation at the same time, allowing Japan’s 10-year bond yields to rise to around 0.5% from the previous upper limit of 0.25%.
The yen index is currently trading around 3% higher. EURJPY, USDJPY, and GBPJPY are dropping around 3.3% at the beginning of the European session. With this in mind, USDJPY is currently at its lowest level since the middle of August while CADJPY, for example, drops to its lowest level since the end of March. I must admit that this gift from the BoJ was a really huge surprise.
Indices are currently on the red side of the market. In Europe, almost all of them are plummeting apart from a small exemption from Estonia, where we have a tiny rise. Indices in Asia also dropped with the largest slide on Nikkei - around -2.4%. American indices were down yesterday and futures are also down now. Dow Jones, for example, is having a fifth consecutive bearish day. It looks like Santa is not back in town yet!
Regarding commodities, there are two different stories. The first one saw a rise in precious metals, with gold climbing 0.4% higher and silver going up 0.6%. On the other side, we have oil currently dropping 0.8%, on the right track to make new, weekly lows.
I am not sure that today’s calendar shall bring us any bigger attractions than those afforded by the BoJ. Further down the road, we have the Retail Sales data from Canada, where a solid rise of 1.5% is expected, compared to the previous month’s drop of 0.5%. The Canadian Dollar is currently a very weak currency – let’s see whether a better number lends a helping hand.