Daily Brief, January 18, 2023: Bank of Japan Disappoints Investors’ Hopes

Yen Collapsed After BoJ Adhered to the Ultra-Easing Policy.

The Japanese yen fell on Wednesday after the Bank of Japan kept interest rates very low, disappointing some investors who had hoped for further policy adjustments.

Last month, the Bank of Japan surprised the market by raising its yield cap on 10-year bonds to 0.5% from 0.25%, doubling the range it allows above or below its zero targets. Since then, speculation has been that the Bank of Japan will likely adjust its yield curve control policy further.

The Japanese yen fell 2.06% against the dollar at 130.80 today, the most significant one-day percentage decline since June. The yen incurred substantial losses, as the euro rose against it by 2% to 141.1 yen, and the British pound rose by more than 2% to 160.71 yen. The Australian dollar rose 2.2%, while the Singapore dollar rose 1.9% against the yen.

Russia and Iran are Developing a Gold-Backed Cryptocurrency to Counter the Dollar’s Dominance.

Russia and Iran are working together to launch a gold-backed cryptocurrency, a “stable currency” that will replace the US dollar for payments in international trade, Russian news agency Vedomosti reported Monday (January 16th). The report said the two sanctioned countries want to issue a cryptocurrency for cross-border transactions. The plan is to launch it in a special economic zone in Astrakhan, southern Russia, which handles Iranian shipments.

These payments are usually made in government-issued currencies such as the US dollar, Russian ruble, and Iranian riyal. Still, the joint venture will only be able to move forward once Russia’s crypto-asset market is fully regulated, according to a senior Moscow lawmaker. In September, the Central Bank of Russia agreed on the need to legalize cryptocurrencies for international payments to mitigate the impact of financial sanctions but has yet to clarify its plans. Stablecoins are cryptocurrencies that source their value from an asset such as the US dollar or gold. They are less volatile in price than crypto assets, protecting investors from extreme volatility in the broader cryptocurrency market.

In recent months, Russia and Iran have accelerated their push to halt the dollar’s dominance in trade, aiming to increase their trade volume to $10 billion annually through steps such as developing an international payments system alternative to SWIFT, which they are banned from employing. 

The US dollar remains dominant as the currency of choice for trade and foreign reserves, despite rising by more than 12% in 2022, buoyed by interest rate hikes.

Gold Falls from Its 8-Month High.

Gold prices fell on Tuesday from their highest levels in more than eight months which they had reached on Monday, amid hopes that the US Federal Reserve will slow the pace of raising interest rates.

Spot gold fell to $1896.57/ounce in today’s early trading hours before inclining to $1912.18/ounce at the time of writing. US gold futures currently trade at $1913.75/ounce at the time of writing.

As for other precious metals, silver fell in spot transactions by 2.1%, to $23.865/ounce in the early trading hours before rising back to $24.502/ounce at the time of writing. Platinum fell by 2.2% to $1038.79/ounce and currently trades at $1047/ounce, and palladium fell 0.6% and is now at the $1737/ounce level.

Tesla Shares Jumped About 7% Due to Price War.

Tesla’s stock rose significantly during Tuesday’s trading, with the support of the American electric car company’s announcement of its decision last week regarding the prices of its products. Tesla announced last week that it had reduced the costs of some of its Model Y and Model 3 cars in several major markets, especially the United States, China, and Germany. Tesla announced its price reduction would range between 1% and 20% on its electric cars in the markets mentioned above and in China in particular. The decision to reduce the prices of Tesla cars is the second in less than three months. The American company has approved reductions in the prices of its vehicles in Japan and South Korea by about 10%.

The global electric car market is witnessing a price war, with the growing competition with auto companies such as General Motors, Ford, and others.

Tesla’s (TSLA) share price jumped 7.4% to $131.49.

The Dow Jones Closed Lower After Four Sessions of Gains.

Most US stock indices declined at the end of Tuesday’s trading, affected by weak quarterly business results revealed by some companies. At the end of the session, the Dow Jones index fell by 1.1%, or about 391.76 points, to 33910.8 points, and the S&P500 index fell by 0.2%. % to 3990.97 points, while the Nasdaq index rose by 0.14% to 11095.1 points.

Goldman Sachs shares fell after the American bank announced a 66% drop in its quarterly profits during the fourth quarter to $1.33 billion, or the equivalent of $3.32 per share, which is profits below analysts’ expectations by about 39%. By 16%, to $10.59 billion, compared to the same period in 2021.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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