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☆ U.S. dollar likely has further upside vs yen despite BOJ move -Goldman
▼ + stars: | 2022-12-21 | by ( ) www.reuters.com time to read: +1 min

On Tuesday, the dollar plunged as much as 4% against the yen, its largest daily percentage fall since 1998. The U.S. currency, however, rebounded on Wednesday, and was last up 0.4% at 132.28 yen. Goldman assumed that, for now, the BOJ move was a technical adjustment and a "sign that policy rates could be adjusted further in coming month", although the basic BOJ framework remained unchanged. This should drive dollar/yen higher over the coming months, Goldman noted. For now, however, Goldman is closing its long dollar/yen position as the market is likely to price in a more meaningful BOJ policy change, which the U.S. investment bank said is a real possibility.

☆ Yen retreats after BOJ policy tweak sparked surge
▼ + stars: | 2022-12-21 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

The BOJ decided to change its "yield curve control" policy on Tuesday even as it kept broad policy settings unchanged. It is letting 10-year yields move 50 basis points either side of its 0% target, wider than the previous 25-basis-point band. On Wednesday, the dollar was 0.4% higher against the yen , having plunged 3.8% in the previous session, its largest one-day drop against the Japanese currency in 24 years. The BOJ, long preoccupied with reviving price growth to avert a risk of deflation, has been an outlier among central banks this year. It has kept interest rates negative while other central banks have hiked hard to tame inflation and bolster domestic currencies against the U.S. dollar.

[1/2] Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, NY, U.S., April 30, 2018. The MSCI All-World index (.MIWD00000PUS) rose about 1.1% on the day, although it is on track for a more than 3% decline in December. This year, the index is set to have fallen for eight out of 12 months, on a par only with 2008 for the number of monthly losses in a calendar year on record. In Europe, shares more than recovered the previous day's 0.4% drop, helped in part by a rally in sportswear stocks. Citi analysts said the calm in equity markets might not last, and thin, year-end trading could lead to volatility.

☆ Yen eases after BOJ policy tweak sparked surge
▼ + stars: | 2022-12-21 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

NEW YORK, Dec 21 (Reuters) - The yen eased in a choppy session on Wednesday, ceding some of the ground gained the previous day when a surprise policy tweak by the Bank of Japan lifted the Japanese currency by 4% against the dollar. The BOJ decided to change its "yield curve control" policy on Tuesday even as it kept broad policy settings unchanged. It is letting 10-year yields move 50 basis points either side of its 0% target, wider than the previous 25 basis point band. On Wednesday, the dollar was 0.2% higher against the yen , having plunged 3.8% in the previous session, its largest one day drop against the Japanese currency in 24 years. I don't think we're going to 150 (yen) anytime soon," Chandler said.

The MSCI All-World index (.MIWD00000PUS) rose 0.67% on the day, although it is on track for a nearly 4% decline in December. This year, the index is set to have fallen for eight out of 12 months, on a par only with 2008 for the number of monthly losses in a calendar year on record. They were boosted by stronger than expected earnings at sportswear giant Nike NKE.N and delivery behemoth FedEx Corp FDX.N. In Europe, shares more than recovered the previous day's 0.4% drop, helped in part by a rally in sportswear stocks. Citi analysts said the calm in equity markets might not last, and thin, year-end trading could lead to volatility.

☆ Global shares rise, but face patchiest yearly performance since 2008
▼ + stars: | 2022-12-21 | by ( Amanda Cooper | ) www.reuters.com time to read: +5 min

The MSCI All-World index (.MIWD00000PUS) rose 0.1% on the day, although it is on track for a 4.4% decline in December. U.S. index futures , rose between 0.3%-0.5%, suggesting some of this strength may carry through to the Wall Street open later. On Tuesday, the Bank of Japan (BOJ) widened its trading band for 10-year government bond yields from 25 basis points (bps) either side of zero to 50 bps. CARRY TRADESBond markets were kept under pressure as the last big central bank anchoring its bond market starts to loosen its iron grip on yields. Citi analysts said the calm in equity markets might not last, and things could get volatile in thinned year-end trading.

The MSCI All-World index (.MIWD00000PUS) rose 0.1% on the day, although it is on track for a 4.4% decline in December. U.S. index futures , rose between 0.5%-0.6%, suggesting some of this strength may carry through to the Wall Street open later. On Tuesday, the Bank of Japan (BOJ) widened its trading band for 10-year government bond yields from 25 basis points (bps) either side of zero to 50 bps. CARRY TRADESBond markets were kept under pressure as the last big central bank anchoring its bond market starts to loosen its iron grip on yields. Japanese 10-year yields rose 7 bps to 0.48%, close to the BOJ's 0.5% ceiling.

The BOJ decided to change its "yield curve control" policy on Tuesday even as it kept broad policy settings unchanged. The surge was a sign that traders expect the BOJ to further tighten monetary policy in coming meetings, said Derek Halpenny, head of research at Japanese bank MUFG. The BOJ's move marked a small step away from the central bank's ultra-loose monetary policy. Traders are still digesting the BOJ's policy tweak, said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. "The market has interpreted the decision as step towards an eventual pivot from the current ultra-dovish monetary policy," she said.

[1/3] Examples of Japanese yen banknotes are displayed at a media event in Tokyo, Japan, November 21, 2022. Those positions took a hit when Tuesday's Bank of Japan policy shift allowed 10-year yields to almost double to 0.47%. On Wednesday the long end of Japan's yield curve actually rallied, with 30-year yields down 2.5 bps to 1.545%. "The 10-year yield is still very low ... maybe they will invest in the 20-year." In Australia, where Japan is also the largest foreign player in the bond market, 10-year yields are up about 20 bps.

☆ Analysis: Kuroda's abrupt policy tweak opens door for bigger shift next year
▼ + stars: | 2022-12-21 | by ( Leika Kihara | ) www.reuters.com time to read: +6 min

Waiting until next year would have forced the BOJ to combat intensifying market speculation of a near-term policy shift, or act when a deep U.S. recession could hit Japan's economy, they say. "When uncertainty is so high over the outlook for U.S. monetary policy, it probably wants to have a free hand on when next to act." POLITICS KEY TRIGGERThe abrupt timing of Tuesday's move also reflects growing political pressure for the BOJ to shift away from a policy narrowly focused on its 2% inflation target, the sources say. Hours before he met Kishida, Kuroda explained in parliament a framework on how the BOJ could exit ultra-easy policy in the future. Another dovish board member, Asahi Noguchi, also said earlier this month it "won't be surprising" for the BOJ to shift monetary policy.

☆ Morning Bid: Questions after the storm
▼ + stars: | 2022-12-21 | by ( ) www.reuters.com time to read: +3 min

A look at the day ahead in European and global markets from Wayne Cole. A day after the Bank of Japan's bombshell and things are looking a little steadier. Most Asian share markets and U.S. stock futures are up, and the Nikkei down only modestly. Analysts assume a formal shift will come after Japan's Spring wage talks and BOJ chief Kuroda's retirement in April. Analysts also suspect the BOJ shift meant the days of Japan desiring, or just accepting, a lower yen were over and the fallout in carry trades has been vicious.

☆ Yen holds on to gains as traders digest BOJ surprise policy tweak
▼ + stars: | 2022-12-21 | by ( Ankur Banerjee | ) www.reuters.com time to read: +3 min

The currency market is still digesting the BOJ's policy tweak, said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. The BOJ decision comes as investors fret about a slowing world economy, sky-high inflation and other central banks' moves to lift interest rates. BOJ Governor Haruhiko Kuroda, who will step down in April, stressed the adjustment was not a prelude to a bigger tweak to the yield curve control policy and an eventual exit from ultra-easy monetary policy. The next policy decision the BOJ takes will likely be a major one, such as changing long-/short-term policy rate targets or terminating yield curve control altogether, according to Goldman Sachs analysts. The Antipodean currencies were wobbly after suffering big losses against the yen as rising Japanese yields threatened to kill flows into usually crowded carry trades.

☆ Analysis: Bank of Japan gives an inch, investors ready to claim a mile
▼ + stars: | 2022-12-21 | by ( Tom Westbrook | ) www.reuters.com time to read: +5 min

But rather than providing breathing room, investors say it is likely to encourage more of the sort of pressure that has bent the bond market out of shape. "Fifty basis points becomes the new 25 basis points. When trading resumed in Japan, 10-year JGB yields shot towards their new ceiling and futures fell so fast it triggered a circuit breaker suspending trade. By the end of the session, 10-year bond yields sat 14.5 basis points higher at 0.395%, the sharpest one-day rise for Japanese 10-year yields in more than 14 years. Mandatory credit Kyodo/via REUTERSThose swaps - another market measure of interest rate expectations - tracked bond yields until early this year.

☆ Glittering gold gives markets some Christmas cheer
▼ + stars: | 2022-12-21 | by ( Tom Westbrook | ) www.reuters.com time to read: +2 min

Gold miners in Australia led a 1.3% jump for the S&P/ASX 200 (.AXJO). On Tuesday the Bank of Japan (BOJ) widened its trading band for 10-year government bond yields from 25 basis points (bps) either side of zero to 50 bps. The resultant drop for the U.S. dollar has spot gold prices testing six-month peaks and gold miners riding high. Benchmark 10-year Treasury yields rose four bps to a three-week high of 3.722%. Japanese 10-year yields rose 5.5 bps to 0.45%, close to the BOJ's 0.5% ceiling.

☆ Yen eases as traders digest BOJ surprise policy tweak
▼ + stars: | 2022-12-21 | by ( Ankur Banerjee | ) www.reuters.com time to read: +2 min

In a surprise move, the BOJ on Tuesday decided to let long-term yields move 50 basis points either side of its 0% target, wider than the 25 basis point band previously, even as the central bank kept broad policy setting unchanged. The currency market is still digesting BOJ's policy tweak, said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. Global investors have been betting on a change in policy from the central bank and will now be increasing their bets on bigger changes. The dollar index , which measures the greenback against yen and five other major currencies, was flat at 103.94. Elsewhere, the Australian dollar rose 0.18% versus the greenback at $0.669, while the kiwi fell 0.13% versus the greenback at $0.634.

☆ Investors won't see big returns on stocks 2023 if a Santa rally doesn't happen before the new year.
▼ + stars: | 2022-12-21 | by ( Phil Rosen | ) www.businessinsider.com time to read: +5 min

The S&P 500 is down about 19% on the year, and those losses could spill over into the new year if stocks don't see the usual holiday rally. But if the S&P 500 misses that final rally, that bodes poorly for rebound odds in 2023. The lack of a holiday rally so far suggests that more rocky markets await when the calendars change. Recall that while the S&P 500 tumbled 37% in 2008, it rebounded 26% in 2009. What's your stock market outlook for 2023?

☆ Premarket stocks: Japan just delivered a lump of coal to investors across the globe
▼ + stars: | 2022-12-21 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +7 min

A surprise announcement from the Bank of Japan sent investors spinning and global markets reeling on Tuesday. The country’s central bank signaled that it would reverse two decades of policy precedent and begin to move away from loose monetary policy intended to keep wages and prices high. The Japanese Central Bank loosened the yield on its 10-year government bonds from 0.25% to 0.5%. The central bank said that inflation expectations have risen. Japan’s is the last major central bank to keep rates negative and this signals that it could be shifting its stance.

As the Federal Reserve, European Central Bank, Bank of England and other Western central banks to varying degrees drained the liquidity punchbowl this year by raising rates and initiating quantitative tightening, the BOJ was on the other side with People's Bank of China filling it back up again. Liquidity support for world markets next year was always going to dwindle, but few would have had a possible BOJ halt to asset purchases on their bingo card so soon. ROCKY ROAD AHEADThis year has been one of the worst ever for world markets, hammered by multi-decade high inflation and interest rates across much of the developed world, and a rampant dollar. "The largest expansion of central bank balance sheets in history will give way to the largest contraction in history," they said. The ECB last week laid out plans to stop replacing maturing bonds from its 5 trillion euro ($5.31 trillion) portfolio.

☆ Billionaire investor Bill Gross warns of chaos ahead for US housing and bond markets if the Fed keeps pushing up interest rates
▼ + stars: | 2022-12-21 | by ( George Glover | ) www.businessinsider.com time to read: +4 min

The housing and bond markets look particularly vulnerable, Gross added. The former PIMCO investment chief said Tuesday that he's worried that there could be a recession as well as market crises in 2023 if interest rates keep rising. "If interest rates keep going up, we've got more than that," he added. The billionaire investor, famously known as 'bond king', also said that rising interest rates could create turbulence in fixed income markets. "With the yen strengthening as opposed to weakening and interest rates moving a little higher this yen carry trade stands a good chance of being reversed."

☆ Asia-Pacific markets trade mixed as Japanese stocks see second day of losses
▼ + stars: | 2022-12-21 | by ( Jihye Lee | ) www.cnbc.com time to read: +1 min

The Bank of Japan's surprise policy shift sent interest rates rising globally, as investors reacted to more evidence central bankers around the world will continue to pressure interest rates higher. I don't think there was anyone out there who expected it," said Ben Jeffrey, rate strategist at BMO. The announcement drove rates higher around the world, as yields on Japanese government bonds (JGBs) rose to 7-year highs. "They were definitely the last one standing in terms of being dovish, and now they're still dovish but less so," said Jeffrey. "It's obviously bearish JGBs and fixed income globally, but in the longer term it should help the yen which will make Treasurys more attractive to Japanese investors next year."

☆ Goldman Sachs says the Bank of Japan may start tightening, but others disagree
▼ + stars: | 2022-12-21 | by ( Jihye Lee | ) www.cnbc.com time to read: +1 min

In this photo illustration, Bank of Japan (BOJ) logo is seen on a smartphone screen. After the Bank of Japan surprisingly widened its target range for Japanese government bond yields, economists at Goldman Sachs said the central bank could belatedly join its global peers by shifting to a tightening policy. The BOJ's monetary meeting concluded Tuesday with no change to its current ultra-low interest rate at -0.1%, a stance it's held since 2016. Following the BOJ announcement, shares of banks listed in Japan rose for two consecutive sessions, bucking the trend of the wider index which saw another day of losses in Wednesday's session. Sumitomo Mitsui Financial Group also rose more than 6% and Mizuho Financial Group also gained more than 4%.

The implications of the world's most dovish central bank turning hawkish are too big to ignore. Japan's net international investment position, the difference between the stock of assets it holds overseas and stock of Japanese assets held by foreigners, is more than $3 trillion. And with Japan's portfolio investment assets and liabilities totaling $7.3 trillion, big yen moves could spill over to global leverage, hedging and derivatives exposures. As Washington-based consultant and former World Bank economist Philip Suttle notes, Kuroda can justifiably claim to have ended deflation. Over his 10-year tenure as BOJ governor, consumer prices have risen an average 0.77% year-on-year, compared with average 0.13% decline in the decade before.

Fears about the Federal Reserve's plan to keep raising U.S. interest rates have weighed heavily on equities since its policy meeting last week. Among the S&P 500's 11 major sectors, the energy index (.SPNY) gained most, finishing up 1.52% as crude oil prices rose. Advancing issues outnumbered declining ones on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers. The S&P 500 posted 1 new 52-week highs and 14 new lows; the Nasdaq Composite recorded 64 new highs and 399 new lows. On U.S. exchanges 10.52 billion shares changed hands, compared with the 11.15 billion average for the last 20 trading days.

☆ Wall Street ends green, dollar dips, Treasury yields rise on BOJ policy shift
▼ + stars: | 2022-12-20 | by ( Stephen Culp | ) www.reuters.com time to read: +4 min

"The slightest tweak in their policy has investors scratching their heads as to how to interpret that going forward." [1/4] The Wall Street entrance to the New York Stock Exchange (NYSE) is seen in New York City, U.S., November 15, 2022. REUTERS/Brendan McDermid/ 1 2 3 4Emerging market stocks lost 0.61%. U.S. Treasury yields jumped after Japan's central bank broadened its yield curve control, which prompted a global bond sell-off. Japan's surprise policy review sent the yen to a four-month peak against the greenback, and the dollar fell sharply against a basket of currencies.

☆ Wall Street gains, dollar dips, Treasury yields rise on BOJ policy shift
▼ + stars: | 2022-12-20 | by ( Stephen Culp | ) www.reuters.com time to read: +4 min

"The slightest tweak in their policy has investors scratching their heads as to how to interpret that going forward." [1/4] The Wall Street entrance to the New York Stock Exchange (NYSE) is seen in New York City, U.S., November 15, 2022. REUTERS/Brendan McDermid/ 1 2 3 4Emerging market stocks lost 0.63%. U.S. Treasury yields jumped after Japan's central bank broadened its yield curve control, which prompted a global bond sell-off. Japan's surprise policy review sent the yen to a four-month peak against the greenback, and the dollar fell sharply against a basket of currencies.

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