XM Investment Research Desk: The Japanese yen put in a strong performance on Monday as falling stock markets and rising bond yields caused investors to buy the safe-haven currency.
The yen gained around 1% against most majors since the start of Monday’s Asian trading. Dollar / yen dropped below 102 to 101.92, euro / yen dropped to 114.34 and pound / yen fell back to 135.
The market’s turbulence was apparently linked to fears that central banks such as the European Central Bank and the Bank of Japan were near their limits in terms of what they could do for additional monetary stimulus.
Fed’s Brainard Speech
The US dollar held to some of its recent gains with currencies other than the yen, as there were some in the market that speculated that the Fed could raise interest rates as soon as its September 20/21st meeting.
The market was focusing on a speech by Fed Governor Brainard’s speech later in the day, who will be the last official to speak before a blackout period begins during which Fed officials are forbidden from discussing their views about the economy in public.
Earlier today in Atlanta, regional Fed President Dennis Lockhart said that current economic conditions warranted a “serious discussion” about a rate hike during next week’s meeting.
Fed officials have tried to put the market on guard for possible rate hikes, but a movement at next week’s meeting still remains an unlikely scenario. The current probabilities for a rate hike next week are 25-30%. Before next week’s meeting, the Fed will get updates on consumer prices and retail sales for August – both due out later this week.
Following heavy losses, oil managed to rebound about 1% to 45.54, while gold was pinned near the lows of the day around $1325. The prospect of less monetary stimulus seems to be hurting gold, which is not benefitting as much as expected from risk aversion.
Following Brainard’s speech, markets will brace for a raft of Chinese data out during Tuesday’s Asian session and in the European session, UK inflation and the German ZEW survey will attract attention.