Market Update: Yen Climbs Ahead of BOJ; Asian Stocks Open Lower

The Japanese yen opened the week in positive territory Monday on speculation that the country’s central bank will provide more clarity on its stimulus program later this month. Meanwhile, Asian stocks and the dollar fell on renewed trade tensions between the United States and China.

Yen Strengthens

The yen was riding high Monday on expectations for fresh policy guidance from the Bank of Japan (BOJ) next week. According to several reports, the central bank’s policy-setting board is considering tweaks to its massive bond-buying program. The BOJ will hold its next monetary policy decision July 31.

The yen was up nearly half a percent against the dollar, with USD/JPY falling 0.4% to 110.94. The currency pair is down 1% since Friday after surging to more than six-month highs last week.

BOJ officials are reportedly discussing ways to keep their debt purchase program sustainable while reducing harmful effects on markets and banks. According to Bloomberg, some officials believe there is no fundamental solution to the harmful side effects on commercial banks’ profitability.

Dollar Drops

The U.S. dollar extended its slide to two-days Monday, as strength from Fed-driven speculation continued to subside in the wake of renewed trade-war risks.

The dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, fell 0.2% to 94.27, its lowest in almost two weeks. DXY has fallen 0.9% over the past two days.

Losses were largely driven by fears that the Trump administration will wage a bigger trade war against China and the European Union. On Friday, President Trump said he’s “ready to go” with additional levies on Chinese imports.

Finance ministers from the Group of 20 countries warned on Sunday that protectionist policies could undermine global growth. The meeting, which took place in the Argentine capital of Buenos Aires, saw G20 representatives pledge renewed commitment to unity in spite of ongoing trade disputes.

Asian Stocks Start Lower

Markets from Tokyo to Sydney traded firmly lower on Monday. In Tokyo, the Nikkei 225 index was down some 250 points, or 1.1% in morning trade. The Topix Index was virtually unchanged.

Sydney’s S&P/ASX Index traded 0.9% lower ahead of the noon hour.

Chinese equities on Friday snapped a five-day losing streak that was the longest in almost two months, as yuan volatility and heightened trade tensions weighed on Mainland markets. The Shanghai Composite Index rebounded 2.1% on Friday, virtually erasing its losses for the week. The rebound was aided by a renewed commitment by policymakers to loosen credit in support of economic growth.

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi