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Japan Hikes Rates, US on Hold

INVESTINGJapan Hikes Rates, US on Hold

After more than 8 years, the Japanese have finally reached a situation where they are abandoning the policy of negative interest rates. At a time when everyone is fighting inflation and setting their sights on rate cuts, Japan is raising them, for good reasons.

Japan Raises Interest Rates

Yes, there’s no mistake about it, the Bank of Japan raised interest rates at its most recent meeting. The increase amounted to 0.1%, consistent with the anticipated scale of the rise. Interest rates in Japan are, therefore, the highest they have been since January 2016. It’s noteworthy that despite the hike, the Japanese yen remains under strong pressure. If the rate increases by about another 0.3%, which considering the pace of recent changes isn’t out of the question, it will reach very significant levels against the dollar. Namely, it would be the weakest yen has been since 1990. The reason for the increases is an improvement in the economy and a looming risk of rising prices. From a currency exchange perspective, it should be noted that raising interest rates should counteract the devaluation of the yen. Future projections don’t look too bad either, considering that interest rates will finally be falling in the US.

FED Decision

The aforementioned interest rates have virtually no chance of changing at today’s meeting of the Federal Open Market Committee. Looking at futures contracts on the interest rate, today’s meeting must retain the interest rate. The June decision, however, is looking interesting as there is an increasingly clear possibility of interest rate cuts. If there’s no chance of change, why is the market so preoccupied with the FED decision? The post-decision communication is far more important. It’s from the perspective shared within that investors will try to infer the future. The closer we get to interest rate cuts, the less positive it should be for the dollar’s value.

Crypto Market Continues to Correct

After the most popular cryptocurrency broke all-time records, many investors decided that it was not worth tempting fate and began to sell, leading the price to dive from peaks above $73,000 to even $61,000. Many analysts point out that despite this major markdown, it’s not at all extraordinary. Since the end of January, the price has gone up from around $40,000. The current markdown is thus about 35% of the increase, which is still not surprising given the intense growth. This doesn’t change the fact that those who joined the trend too late may now be deeply regretting it.

Maciej Przygórzewski – Chief Analyst at and

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