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The yen surged to its highest level in a year, pushing the dollar into a corner as the market braces for a potential bombshell from the Federal Reserve tomorrow. Investors are betting big that the Fed might pull an unexpected move and deliver a far more aggressive cut than the widely expected 25-basis-point. Right now, the dollar is down 0.10%, trading at 140.690 yen. This has rattled the futures market, which now predicts a 61% chance of a 50-basis-point cut, up from just 15% last week. Market gets edgy, treasury yields plummet US Treasury yields are sliding fast. Over the last two weeks, 10-year yields have fallen by 30 basis points.  On Monday, two-year Treasury yields—more directly tied to Fed policies—dropped another 2.5 basis points, landing at 3.5509%, after sitting at 3.94% just two weeks ago.  The DXY, which tracks the greenback against six major currencies, dropped 0.29% to 100.73. Other currencies took advantage of the dollar’s weakness.  The British pound jumped 0.64% to $1.3206, and the euro climbed 0.42%, hitting $1.1123. Marc Chandler, chief market strategist at Bannockburn Global Forex, said: “Most of this action is the result of speculation over the Fed’s next move. The market was cool with a 25-basis-point hike, but now the idea of a 50-basis-point cut is fueling these swings.” All eyes on the Bank of Japan Investors are also keeping a close eye on the Bank of Japan (BOJ), which is set to announce its own interest rate decision on Friday. While the BOJ is expected to keep its short-term policy rate unchanged at 0.25%, the narrowing gap between US and Japanese interest rates has pushed the yen higher. This has triggered billions of dollars in unwinding yen-funded carry trades. The bank has already raised rates twice this year, and some of its…

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Filed under: News - @ September 16, 2024 9:17 pm