Japan In Uncertainty
The yen inched upwards after Tokyo’s election results as investors speculate about the future of the Bank of Japan’s policy. The BOJ may have to emerge from its ultra-low interest rate policy this year, following the global hawkish trend adapted by some of the world’s leading central banks.
Additionally, the Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party’s support has tumbled in recent election polls in favour of Governor Yuriko Koike’s party, Tokyo Citizens First party. This is a historical turnaround for Japan, where the LDP suffered its worst-ever results with a mere 23 seats o 79 for the TCF.
China Makes Connections
China and Hong Kong have opened a bond trading link called Bond Connect which allows foreign fund managers to access China’s 9 trillion-dollar debt markets without having an onshore account.
This provides investors with another way to gain exposure to China’s debt market. This could be bullish for the yuan.
Dollar Dives
The dollar has had the worst year since 2006 as dollar bulls grow shy. The dollar has shrugged off positive data releases this year however investors have squealed at negative economic data which perhaps suggests a bearish undertone for the greenback.
The dollar finished the first half of the year on a four-month downturn, giving up post-election gains. The greenback has shed 6.6% in 2017.
Investors have lost faith in the ability of Donald Trump to deliver on fiscal stimulus which has outweighed the hawkish Federal Reserve and higher US interest rates.
The global hawkish tones from Europe and beyond has afforded investors alternatives to the dollar, therefore weighing down prices.