The Indian rupee plummeted to a record low on Wednesday, driven by the unwinding of carry trades and increased dollar demand from importers. Despite intervention from the Reserve Bank of India, the rupee continues to face pressure from investors exiting carry trades that used the Chinese yuan and Japanese yen. Experts anticipate continued downward pressure on the rupee in the near term.
UBS has adjusted its outlook for the USD/JPY currency pair, attributing the change to the robust performance of the US dollar. The firm has increased its quarter-end predictions for the pair to ¥155 for June 2024, followed by ¥152, ¥148, and ¥145 for the subsequent quarters through March 2025. This revision comes as the market recalibrates its expectations for Federal Reserve rate cuts, which have been scaled back significantly. Additionally, UBS notes that short positions in the yen have reached extreme levels, contributing to the dislocation of the USD/JPY pair.
Gold prices continued their downward trend in Asia, falling below US$2,300 without any significant news catalysts. Currency markets remained relatively stable, with the US dollar losing some ground against major currencies. Japan’s finance minister hinted at potential FX action, but USD/JPY showed minimal response. Bank of Japan Governor Ueda provided no new insights on the central bank’s future policy moves. The Wall Street Journal reported on potential US sanctions against Chinese banks aiding Russia’s war effort, leading to a decline in mainland Chinese stocks.
Suzuki’s comment caused a stir in the currency market, with USD/JPY experiencing a slight decline. The remark, which has been widely reported by news outlets, highlights the potential impact of high-profile statements on financial markets.
