The Big Question: Is the weakness seen in the dollar this year finally coming to an end?
The US dollar edged up in the early hours of the Asian trading session on Friday, extending a recent uptrend in the USD/JPY chart.
The dollar gained some 0.10 percent against the Japanese yen before midday in Tokyo trading. All eyes are now on the Federal Reserve symposium in Jackson Hole, Wyoming, where Fed chair Janet Yellen is expected to deliver a speech at 1400 GMT time.
Yellen’s speech has a high potential impact on FX markets in particular and traders are advised to adjust their risk levels accordingly.
The question traders are asking themselves is if the weakness shown by the dollar will now end, or if this is just the start of a longer-term decline for the greenback.
The initial optimism following Donald Trump’s election victory last year seems to be fading off, as his business-friendly agenda of tax cuts and deregulation may prove difficult to pass in Congress. With the President preoccupied with party infighting, Russia investigation, and “employee turnover” at the White House, traders are starting to realize that the initial prospects were too optimistic.
In the short term though, Yellen’s speech will determine the direction of the US dollar.
European Central Bank (ECB) President Mario Draghi is also participating at the Jackson Hole symposium and is expected to deliver his remarks at 1900 GMT. However, expectations for this speech are somewhat measured, as the ECB has made it very clear that there will be no change in policy until the next ECB meeting.
Still, it is worth noting that Mr. Draghi has previously used the conference as an opportunity to deliver critical, market-moving news.
Main Market Movers – Midday Asian Trading Session
|Indexes||Value at Midday||Daily Change|
|Japan-Nikkei Stock Average 225||19,473||0.60%|
|China-Shanghai Composite Index||3,309||1.16%|
Major Asian indexes advanced Friday morning, holding on to their gains for the week and ignoring lower stock prices in the US the day before.
In Japan, the Nikkei 225 was up 0.60 percent, trading at 19,473, near the same level as the start of the week.
In China, the Shanghai Composite gained a good 1.16 percent to 3,309, ending the week on a strong note and breaking through the previous swing high from early August.
The Shanghai index is now at a high level, currently breaking through previous longer-term market tops. Some analysts believe the market is ripe for a reversal in trend in the coming days. However, if the index can push through these previous highs, it is a very bullish sign for Chinese Mainland shares.
In Australia, the benchmark ASX 200 opened the day lower, but then traded back to where the day started at around 5,737.
The Japanese Yen is slightly down today versus the US dollar, with JPY/USD trading at 0.009124, down 0.04% for the day.
In Australian trading, the AUD/USD is unchanged for the day at 0.78982.
WTI Oil was up 0.27 percent to $47.73, back at the same level where the price has consolidated in recent days.
Brent Crude also gained 0.58 percent to $52.41 per barrel.
Gold was up 0.10 percent to $1,286.56 an ounce.
Business News across Asia
In China, aluminum prices are expected to remain at high levels following a statement from the State Council saying that the country should continue cutting in the current oversupply of aluminum.
In Japan, the government released data showing that the core consumer-price index increased 0.5% in July compared with the same month the previous year, in line with expectations.
Take away: This provides some evidence that Japan is, at least temporarily, succeeding in its long battle against deflation.
Featured image from Wikimedia Commons.