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USD/JPY & US-Stock Market CORRELATION (2015, 29th Jan. 2016), BOJ/neg. interest rate-decision
There is some correlation between the Japanese Yen (USD/JPY) and the US-Stock-Market (S&P 500), should be obvious:
The Bank of Japan on Friday (29th Jan. 2016) became the latest central bank to move its deposit rate into negative territory. By doing so, the BOJ thrust the theme of monetary-policy divergence - which market strategists pointed to as the main driver behind the dollar’s aggressive rally between the summer of 2014 and early 2015 - back into the spotlight. Following chart shows the evolution of USD/JPY in the weeks since the year 2013 and in the week of the neg. interest rate-decision carried out by the BOJ:
The worldwide era of negative interest rates began in July 2012 when the Denmark National Bank set its deposit rate below zero to protect its economy from an influx of hot money as the eurozone debt crisis escalated.
In June 2014, the European Central Bank became the first major central bank to adopt negative rates when it cut the interest rate on its deposit lending facility below zero. A second cut followed a few months later - then, in Dec. 2015, the ECB cut it again to its current level (minus 0.3%). The Swiss National Bank first set its deposit rate below zero in December 2014. Sweden’s Riksbank cut its deposit rate below zero in February 2015, see overview below:
Some facts about Bank of Japan’s Negative Interest Rates (Friday, 29th Jan. 2016)
♦ Kuroda Pulls Another Surprise From Bag of Tricks
Just when it looked like Gov. Haruhiko Kuroda was running out of surprises, he managed to shock markets again. Mr. Kuroda has repeatedly said he wasn’t considering adopting a negative interest rate. The announcement pushed the dollar up by as much as 2.2% against the yen and buoyed the Nikkei Stock Average up 3.5% at one point.
♦ Dive Into Negative Rates Can Go Deeper
The BOJ says it will cut the interest rate, set at minus 0.1%, further into negative territory if necessary. That compares with minus 0.75% in Switzerland, minus 1.1% in Sweden and minus 0.65% in Denmark.
♦ Unhappy Campers on BOJ Board
The BOJ board was split 5-4 on the vote, with Takahide Kiuchi, Sayuri Shirai, Koji Ishida and Takehiro Sato dissenting the decision. Negative interest rates could damage the banking system if they cause a sharp worsening in financial firms’ earnings and have little effect on the lending patterns of banks choosing to hold cash.
links for different articles on the BOJ-topic:
- http://www.marketwatch.com
- http://www.marketwatch.com
- http://blogs.wsj.com
