BoJ’s Uchida: We won't hike rates when markets are unstable

Dhwani Mehta FXStreet

Bank of Japan (BoJ) Deputy Governor Shinichi Uchida expressed his view on the bank’s interest rate outlook, exchange value and the current market volatility.

Key quotes

Our interest rate path will obviously change if, as a result of market volatility, our economic forecasts, view on risks and likelihood of achieving our projection change.

Japan is not in an environment where we would be behind the curve unless we hike rates at set pace.

We won't hike rates when markets are unstable.

Personally believe US economy can achieve soft landing.

See no big change to Japan, US, economic fundamentals so market reaction to single US data appears too big.

Recent market moves are extremely volatile so watching impact of their moves on economy, prices with extreme vigilance, will respond appropriately in guiding policy.

We must maintain current degree of monetary easing for the time being.

Japan's real interest rate very low, monetary conditions very accomodative.

If economy, prices move in line with projections, it is appropriate to adjust degree of monetary easing.

Degree, speed of FX moves' impact on prices bigger than in past.

Weak yen and subsequent rise in import costs pose upside risks to inflation.

Short-term interest rate, at 0.25%, is still very low on real basis, so we continue to support economy with very loose policy.

Given rapid market volatility, we need to maintain current level of monetary easing.

Stock market volatility affects corporate activity, consumption so is important factor in guiding monetary policy.

Reversal of weak Yen means risk of inflation overshoot has diminished, which would affect our policy.

Expect Japan's consumption to stay solid.

Changes seen in Japan's labor market are structural and irreversable.

It is true over 10 years of massive monetary easing has caused various side-effects.

Our scheduled tapering of bond buying likely won't cause major changes in degree of monetary easing.

Short-term rates have bigger effect of stimulating economy than long-term rates.

Market reaction

The Japanese Yen sees a fresh bout of selling following these dovish remarks from the BoJ official, as USD/JPY storms through the roof to retest 147.50. The pair is currently trading at 146.82, still up 1.75% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

AUD/USD sits near monthly high, around 0.7035 on hawkish RBA

AUD/USD trades around 0.7030-0.7035 in the Asian session on Thursday, near its monthly top, as recent hawkish comments from RBA officials continue to underpin the Australian Dollar. The US Dollar, meanwhile, struggles to lure buyers amid further declines in US bond yields, adding support to the pair. However, Fed rate-hike bets and geopolitical uncertainty help limit losses for the safe-haven buck, warranting caution for Aussie bulls.

USD/JPY remains confined in a familiar range; holds steady above 158.00

USD/JPY extends its consolidative price action through Thursday's Asian session, trading just above 158.00 amid diverging forces. Uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. The US Dollar, meanwhile, languishes near multi-week low amid declining US bond yields. Furthermore, looming intervention risks limit JPY losses and cap the pair. Traders also seem hesitant ahead of the Fed and BoJ meetings next week.

Gold hangs near one-week low; eyes $4,100 break amid Fed hike bets

Gold attracts fresh sellers in Thursday’s Asian session, sliding closer to a one-week low touched the previous day. Firming expectations for an imminent Fed rate hike, bolstered by oil-driven inflation risks, weigh on the non-yielding bullion. Meanwhile, declining US bond yields counter geopolitical uncertainty, keeping US Dollar bulls on the defensive. This helps XAU/USD defend $4,100.

XRP and XLM recovery stalls below EMAs

Ripple (XRP) and Stellar (XLM) remain under pressure on Thursday as both struggle to sustain their recent recovery attempts. XRP trades below $1.36, while XLM slips beneath $0.183, as mixed derivatives metrics, weakening momentum indicators and heating market conditions suggest cautious market sentiment. Derivatives data shows weakening conditions for Ripple and Stellar.

What the midterm elections mean for Treasury yields, the Dollar and Gold

Democrats are priced to take the House, so November 3 comes down to the Senate and how much Washington can borrow without the other party. Treasury yields will show the answer first, then the Dollar and Gold. On November 3, Americans vote for all 435 House seats and 35 Senate seats. For bond prices, the result comes down to one thing: how much the government will borrow over the next two years.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.