Comment: Dollar slumps vs yen as weak data lower Fed hike ceiling

Applied Energetics

25/10/2022 15:51

Oct 25 (Reuters) - USD/JPY fell on Tuesday after big drops in U.S. home
prices  urn:newsml:reuters.com:*:nN9N2YW00V and consumer confidence  urn:newsml:reuters.com:*:nN9N2YW00W dragged down Treasury
yields and the dollar, lowering the risk of more Japanese intervention ahead of
upcoming BoJ and Fed meetings.
    Tuesday's 147.525 EBS low shows dip-buying demand despite MoF intervention
driven dives to 145.28/4.50 Monday and Friday, but Monday's 149.70 high looks
safe for now. 
    Treasury yields tumbled roughly 15bp from the belly out, reinforcing the
view that markets have already priced in more than enough Fed tightening to
trigger a recession, receding inflation and eventual rate cuts.
    The housing sector -- a huge store of wealth -- is highly sensitive to
interest rates, and the surge in 30-yr mortgage rate almost to 7% from less than
half that a year earlier has taken a toll. 
    House prices growth decelerated to 13.6% from a year ago versus 16% in July.
    Markets are still projecting a fourth consecutive Fed hike of 75bp next
Wednesday, though the ceiling is now seen below 4.9%, with cuts late in 2023. No
change in the BoJ's ultra-easy policies are expected Friday.    
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 (Randolph Donney is a Reuters market analyst. The views expressed are his own.)
 ((Randolph.donney@thomsonreuters.com))