The factors of the fluctuation in exchange rate can be classified into political factors and economic factors.
Political factors include events such as elections and international conferences. As for economic factors, it is worth paying attention to the central bank’s monetary policy, which greatly influences the exchange rate in medium and long term, and Gross Domestic Product (GDP), Consumer Price Index (CPI), and economic indicators such as the US employment statistics are important in determining the monetary policy.
The focus of this year will be the consumer price and the Fed’s interest rate hike pace same as last year. Furthermore, policy revisions by the Bank of Japan and trends in the global economy are expected to be the main factors in determining exchange rates.
1. US consumer price
2. Fed interest rate hike
3. Bank of Japan’s policy revision
4. Japan’s trade deficit
5. China’s economic recovery
6. Geopolitical risk
To judge if the housing price will fall in the US, the most important reference factor is to see whether rents will decline around spring. As for the commodity price, if the slowdown in the service industry continues, we may have hopes for a decline in prices.
The Fed will decide whether to raise interest rates while keeping an eye on price trends, but it is expected that expectations for a halt to interest rate hikes will rise after early July.
However, it may be difficult to cut interest rates this year. If the economy deteriorates, market expectations focus will be shifted from inflationary measures to economic measures. Even if prices of commodities fall due to the economic slowdown, if they remain high interest rate above 2% above the inflation target, a rate cut will be a source of turmoil for the market.
Monetary easing policy revisions will be expected at each monetary policy meeting of the Bank of Japan this year.
With Governor Kuroda’s term expires around April 8, it is expected that the view of policy revisions will prevail.. Japan’s lower house approved Ueda as next BOJ chief, however, it should be noted that if there is no change on the policy, the yen will continue to depreciate.
The new Governor of the Bank of Japan will attend the Monetary Policy Meeting for the first time on April 27-28, also FOMC (Federal Open Market Committee) (May 2-3) is just four days away.
The deficit in the balance of trade, which is calculated by subtracting imports from Japan’s exports, is a factor behind the yen’s depreciation. It may not be able to hope for a rapid reduction in the deficit, but even a gradual decline is expected to a stronger yen.
However, it is possible that exports will not perform well due to the global recession and the trade deficit will not decrease as much as expected.
China’s economic recovery was expected with the end of the “Zero Corona Policy,”. However, the rapid increase in the number of infected people has raised the possibility that economic recovery in the first half of the year will not be possible.
The global economy is expected to remain sluggish. According to the World Economic Outlook released by the Organization for Economic Co-operation and Development (OECD) in November last year, the GDP growth of global economy in 2023 is 2.2%, while 0.5% for the US, 0.5% for Eurozone, 1.8% for Japan and 4.6% for China. US GDP could outperform on recent strong economic data.
However, if China’s economy continues to contract due to the spread of the new coronavirus, it may be quite difficult to achieve 4.6%. With US and European growth forecasts as low as 0.5%, further deterioration in China’s economy could quickly turn negative.
Among Japan, the United States, and Europe, Japan’s growth rate forecast is the highest and seems promising, but if the Chinese economy deteriorates more than expected and the United States and Europe experience negative growth, it will have a major negative impact on Japan as well.
It is necessary to be cautious of trends in Russia and China. Eurasia Group, a US political risk research company, has ranked Russia and China’s moves first and second in this year’s “Top 10 Risks” list. Geopolitical risks are completely unpredictable, as Russia’s invaded Ukraine on February 24 last year.
Information extracted from: https://media.rakuten-sec.net/articles/-/40211 translated and updated by Rakuten Securities HK
|#||The total accumulated number of accounts opened with Rakuten Securities was 9 million, as of 8th May, 2023. Please click here for details.|
|^||Rakuten Securities was ranked as the world’s fourth largest retail forex broker by volume in Q4 2022 from Finance Magnates.|
|Ŧ||Only available for clients who hold a Rakuten FX account.|
|¤||Fixed spreads are offered in Rakuten FX account during at least 95% of the time of the monthly core-time trading period (8am to 2am HKT of every trading day). However it is not guaranteed and it shall not apply to the extreme markets circumstances, include but not limit to low liquidity, high volatility, news events and public holidays. During extreme markets circumstances, spreads may widen beyond the offered spreads. Please always refer to the trading platforms for the most updated spreads.|
|ɞ||Order execution rate is calculated based on the AS Streaming and Streaming trading orders in 10k or less order size with lower than 1 pip slippage setting in which were executed during the period between Jan 1 to Nov 1, 2017.|
|ʊ||MARKETSPEED FX platform is the winner of “Online Forex Trading Platform” by Good Design Award in 2012.|
To safeguard your trading account(s), you are highly recommended to set a strong password and change it regularly.
When executing customers’ trades, Rakuten Securities HK can be compensated in several ways, which include, but are not limited to: charging fixed lot-based commissions at the open and close of a trade, adding a markup to the spreads, acting as a counterparty in the transactions. As a result, Rakuten Securities HK’s interests may be in conflict with yours.
Rakuten Securities Hong Kong Limited (“Rakuten Securities HK” SFC CE Number: AIM232) is a wholly owned subsidiary of Rakuten Securities, Inc. (*) Rakuten Securities, Inc., one of the major online brokers in Japan, founded in 1999, is a subsidiary of Rakuten Group, Inc. (TOKYO: 4755).
The risk of loss in leveraged foreign exchange trading can be substantial. You may not be suitable as you may sustain losses in excess of your initial margin funds. Leverage can work against you. Placing contingent orders, such as “stop-loss” or “stop-limit” orders, will not necessarily limit losses to the intended amounts. Market conditions may make it impossible to execute such orders. You may be called upon at short notice to deposit additional margin funds. If the required funds are not provided within the prescribed time, your position may be liquidated. You will remain liable for any resulting deficit in your account. You should therefore carefully consider whether such trading is suitable in light of your own financial position and investment objectives. Do not speculate with capital that you cannot afford to lose. If you decide to trade products offered by Rakuten Securities HK, you must read and understand the information and disclosure provided by Rakuten Securities HK. Rakuten Securities HK may provide general commentary which is not intended as investment advice and must not be construed as such. Seek advice from a separate financial advisor. Rakuten Securities HK and Rakuten Group assumes no liability for errors, inaccuracies or omissions; does not warrant the accuracy, completeness of information, text, graphics, links or other items contained within these materials. Read and understand the Terms and Conditions on Rakuten Securities HK’s website prior to taking further action.
Information Security on Internet: To protect your privacy, do not access your trading account via public or shared computer or save your password locally in any computer or mobile device after logging in. Rakuten Securities HK will never ask you to send any of your personal information such as account number and password to us directly via e-mails.
(*)Company Registration ID (in Japan): Kanto Local Finance Bureau (Financial Instruments Firms) No.195