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Risk aversion has eased, and the US dollar against the Japanese yen has slightly rebounded, waiting for the Federal Reserve's interest rate decision to be finalized.
The Japanese Yen weakened during Wednesday's Asia session, ending a three-day appreciation against the USD. With major Asian nations and the USA set to hold high-level trade discussions in Switzerland, the Global market's risk sentiment improved, reducing investors' demand for traditional safe-haven assets like the Yen, leading to a steady rise in the USD/JPY Exchange Rates, trading around 143.00. On the USD side, there was a slight rebound ahead of the Federal Reserve's policy decision, influenced by some investors repositioning. The market widely expects the Federal Reserve to keep interest rates unchanged, thus the focus is on the wording of the statement and Chairman Powell's speech. Any hints regarding future rate cut paths could have a significant impact on the USD's movement.
The surge of the New Taiwan Dollar is just a rehearsal, and USD Assets are facing a "2.5 trillion selling pressure"?
The renowned economist Stephen Jen warned that exporters and investors in Asia may have accumulated an "extremely large" reserve of dollars over the years. As the trade war led by the USA intensifies, some Asian investors may repatriate substantial amounts of capital, which could trigger a large-scale Outflow of dollars.
Countdown to the Federal Reserve's interest rate decision, Goldman Sachs expects there will be three more rate cuts this year.
Goldman Sachs predicts that the Federal Reserve may cut interest rates three times in the coming months, specifically in July, September, and October, for a total reduction of 75 basis points.
A capital flight of 2.5 trillion US dollars: could Asia's reversal of capital trigger a dollar collapse?
① Stephen Jen, the founder of the famous 'Dollar Smile Theory,' stated on Wednesday that as Asian countries gradually reduce their dollar reserves, the dollar may face a 'avalanche' sell-off of up to 2.5 trillion dollars; ② Macro strategist Simon White also mentioned last week that after the trade war, a capital war is a logical next step, which will have adverse effects on USA Treasuries, risk assets, and the dollar.
Europe Natural Resources Fund: The likelihood of the Federal Reserve lowering interest rates in June has decreased, still bullish on Gold.
The market believes that the likelihood of the Federal Reserve cutting interest rates in June has decreased from 73.7% four weeks ago to 30.2% last Friday.
Metzler Expects Two Fed Rate Cuts in 2025, Market Might Be Optimistic -- Market Talk