"I think that the agreement (between the government and the Bank of Japan on the target inflation rate of 2%) remains in force, and I do not see any need to change anything", Japanese Prime Minister Shinzo Abe said today in a speech to members of the parliamentary committee. "I expect that the Bank of Japan will adhere to the mitigation policy in order to achieve the target level of inflation", he said. At the meeting of the same parliamentary committee, the Governor of the Bank of Japan Haruhiko Kuroda spoke in support of the current soft monetary policy.
These statements were made at a time when market participants expect that the Bank of Japan may consider raising interest-rate targets in the near future to ease the collateral effect of the aggressive easing of monetary policy.
This has become one of the factors of strengthening the yen, including against the dollar, this month.
Expectations for changes in the direction of extra soft policy of the Bank of Japan stopped this month the growth of the Japanese stock index Nikkei Stock Average. This year, the Nikkei index grew by 18%, with almost the growth coming in the period after the beginning of September. Nikkei Stock Average reached a peak this month near the mark of 23400.00 amid the strengthening of shares of export-oriented companies and the victory of Prime Minister Shinzo Abe's party in the parliamentary elections held in Japan last month. Nikkei Stock Average set a record for the duration of continuous growth (8 consecutive weeks). However, the index subsequently declined amid expectations of a change in the policy of quantitative and qualitative easing by the Bank of Japan and the strengthening of the yen, while other major central world banks made statements that showed the possibility of a gradual tightening of their monetary policies.
Stopping the growth of the Japanese stock market, apparently, has alarmed the monetary authorities of Japan. And today Abe and Kuroda tried to dispel doubts of investors in the commitment of the Bank of Japan to the former soft policy.
The next meeting of the Bank of Japan, dedicated to monetary policy, will be held on December 21. Last month, the Bank of Japan reiterated its commitment to buy government bonds in the amount of 80 trillion yen a year, and the head of the Bank of Japan at a subsequent press conference promised that "we will patiently adhere to the policy of powerful easing in order to achieve inflation of 2%" and " take additional mitigation measures, if necessary ".
At the same time, the dollar is now recovering in the foreign exchange market and continues to grow during the European session, interrupting the drop observed within 4 days after the publication of the minutes from the November meeting of the Fed.
On Monday, the president of the Federal Reserve Bank of Dallas, Robert Kaplan, spoke in favor of raising rates "in the near future", in part because of concerns over the economy's overheating.
Today, the dollar also was supported by the statements of the President of the Federal Reserve Bank of New York, William Dudley, who said that the economy is close to achieving full employment. Dudley reiterated his view that low inflation with low unemployment - "not really bad" and expressed support for a gradual rate hike.
Investors are waiting for Jerome Powell's speech in the Senate today. "We expect that interest rates will grow a little more, and the amount of the balance will gradually decrease", says the text of his speech, which will begin at 14:44 (GMT).
It is likely that Powell will support the Fed's plan to further raise the rate, which will provide short-term (1-2 days) support to the dollar.
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Support levels: 110.80, 110.15, 110.00, 109.20, 108.80, 108.10, 107.30, 107.00, 106.50, 105.00
Levels of resistance: 111.65, 111.85, 112.55, 113.10, 114.00, 114.40, 115.00, 116.00
Trading Scenarios
Buy in the market. Stop Loss 110.70. Take-Profit 111.65, 111.85, 112.55, 113.10, 114.00, 114.40
Sell Stop 110.70. Stop Loss 111.70. Take-Profit 110.15, 110.00, 109.20, 108.80, 108.10, 107.30, 107.00, 106.50, 105.00
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