The dollar index (DXY00) is currently up by +0.39% at a 1.5-week high, driven by the weakness in the yen, which has plummeted to a 9.75-month low. This decline in the yen is attributed to concerns that the Japanese government may implement a stimulus package that would significantly increase Japan’s debt burden. Additionally, the US trade news today has also supported the dollar, with the August trade deficit narrowing more than expected.
On the other hand, US MBA mortgage applications have fallen by -5.2% in the week ended November 14, with both the purchase mortgage sub-index and refinancing sub-index showing declines. The average 30-year fixed-rate mortgage has increased slightly to 6.37%.
The Euro (EUR/USD) is down by -0.23% at a 1-week low, influenced by the strength of the dollar. However, losses in the euro are limited following reports that the Trump administration is working with Russia on a plan to end the war in Ukraine. Central bank divergence is also supporting the euro, as the ECB is seen as having completed its rate-cut cycle, while the Fed is expected to cut rates further.
In the currency market, USD/JPY is up by +0.68% as the yen has reached a 9.75-month low against the dollar. This decline in the yen is due to dovish comments from Goushi Kataoka, advising Japanese Prime Minister Takaichi, suggesting that the BOJ is unlikely to raise interest rates before March. Moreover, concerns about Japan’s debt burden have intensified following the announcement of a substantial supplementary budget to boost domestic demand.
In terms of Japanese economic news, Sep core machine orders have increased by +4.2% month-on-month, surpassing expectations and marking the biggest rise in 6 months. Furthermore, higher Japanese government bond yields, with the 10-year JGB yield reaching a 17-year high of 1.781%, have supported the yen.
Gold and silver prices have seen a significant increase today, with December COMEX gold up by +1.55% and December COMEX silver up by +3.03%. This surge in precious metals prices is attributed to comments from Goushi Kataoka regarding the BOJ’s interest rate policy and underlying safe-haven demand amid geopolitical uncertainties.
Despite the rally in the dollar index and reduced expectations for a Fed rate cut in December, strong central bank demand for gold continues to support prices. Central banks, including China’s PBOC, have been increasing their gold reserves, with global central banks purchasing 220 MT of gold in Q3.
Overall, while long liquidation pressures have weighed on precious metals prices since mid-October, the current market dynamics indicate a mix of factors influencing currency and commodity markets. It will be interesting to see how these trends evolve in the coming weeks.
