Global Markets Rally, Yen Drops On Future Hikes Comments

Global markets continued to gain Monday’s lost ground on Wednesday morning with JP Morgan’s analysts suggesting that the Japanese shares sell-off may almost be over. Japan is once again in the spotlight of investors and traders as the Bank of Japan’s (BoJ) Deputy Governor said that future rate hikes could depend on market volatility.

BoJ Deputy Governor Says Rate Decisions Linked To Volatility

The BoJ’s Deputy Governor, Shinichi Uchida, said that “as we’re seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing for the time being.”

Commenting on his remarks, economists suggested that the BoJ acknowledged the market shock caused after last week’s interest rate hike, adding that potential instability after a similar move in the future could make the central bank’s policymakers to reconsider their strategy.

Uchida noted that it would be “hard to say how long it will take to gauge impact of market rout on economy, prices.” The Japanese yen lost over 1.5% against the US dollar just after the deputy governor’s comments went public.

ANZ: RBNZ To Keep Rates On Hold?

With the Reserve Bank of New Zealand (RBNZ) having its monetary policy meeting, ANZ’s economists published their forecast and some insights. The bank’s analysts suggest that the RBNZ’s policymakers are likely to keep the Official Cash Rate (OCR) unchanged  after their meeting scheduled on August 14th, adding that there could be potential market disappointment in this case.

However, they also note that the RBNZ could signal a potential rate cut later in the year as the economy seems to be slowing down. The forecast notes that labour market in the second quarter was running hotter than anticipated with non-tradable inflation being 1% more than expected.

Ex-ECB Head Trichet Says No Reason To Panic

Veteran banker and ex-ECB president Jean Claude Trichet suggested that there is no reason to panic when it comes to the state of the US economy. Speaking to CNBC reporters, Trichet said that recently released financial data would not justify any emergency interest rate cut with his view being in dire contrast to other economists’ opinions who have urged the Federal Reserve to move quickly.

The French economist said that the Bank of Japan’s (BoJ) monetary policy adjustment as well as labour data and geopolitical tensions played a role in the recent stock market drop noting that “the three have played their role, in my opinion, in triggering this [U.S. dollar-yen] correction which was nevertheless overdue, because everybody knew that the yen was not in an appropriate position, and the carry trade had been, I would say, very active during a long period of time.”

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