Natixis analysts comment on the trends they see for major currencies.
The Yen exchange rate depends on the BoJ’s monetary policy strategy
The persistence of inflation in the euro zone will probably lead the ECB to keep interest rates quite high, while the Fed may cut them as disinflation in the United States eases. This would favor an appreciation of the Euro against the Dollar, but, on the other hand, the US is more attractive than the Eurozone for corporate investment: in short, a slight appreciation of the Euro against the Dollar can be expected.
China’s weak growth, due to an aging population, weak productivity growth, rising household savings rates and weak investment, is leading Chinese authorities to seek a weakening of the renminbi; hence the current rate cuts in China, which will cause a depreciation of the RMB, although with the limitation of not damaging too much the financial situation of Chinese banks.
The fact that long-term interest rates remain very low in Japan, due to the yield curve control policy, should cause a further depreciation of the yen against the Dollar. This depreciation will end when dollar interest rates fall and if the BOJ gradually abandons the 10-year rate capping (YCC) policy, a move expected to begin in 2024.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
