Daily Agenda: Currency Markets Signal More Pain for Japan

The yen reaches appreciates against the dollar; China’s currency reserves expand; Venezuela slips deeper into the abyss; oil prices slide.


Kiyoshi Ota

In early trading on Thursday morning, the Japanese yen reached another multiyear high versus the U.S. dollar as markets factored out near-term intervention by policymakers in Tokyo. Year-to-date Japan’s currency has appreciated against the greenback by nearly 10 percent. Critically, the yen’s rise also underscores investor doubts that quantitative-easing measures and negative rates can achieve goals laid out by Bank of Japan Governor Haruhiko Kuroda. In comments in Paris on Wednesday, Prime Minister Shinzo Abe indicated that when he acts as host of the Group of Seven summit next month he will urge global policymakers to coordinate efforts. With more central bankers experimenting with negative rates, Abe’s hopes may be wishful thinking.

Chinese currency reserves stabilize. March reserve data released today by the Bank of China surprised analysts with a $10 billion increase in foreign currencies, bringing Beijing’s total war chest back above $3.23 trillion. The shift came after four consecutive months of declines that sparked concerns that the central bank might ultimately be forced to allow the yuan to float freely.

Venezuela descends deeper into chaos. On Wednesday, the government of Venezuela announced three-day weekends for the coming two months in an effort to conserve energy. Hyperinflation and depleted state coffers have not convinced President Nicolas Maduro to relinquish power. Currently he is controlling the government through court mechanisms blocking opponents in the legislative branch.

Oil prices slide. Front-month futures contracts for West Texas Intermediate grade crude oil declined in trading on Thursday after a greater than 5 percent tumble in the prior session. Energy Information Administration inventory data on Wednesday revealed a nearly five-million barrel decline in stockpiles in the US.