On February 24th, former Bank of Japan Policy Board member Makoto Sakurai indicated that if the yen resumes its decline ahead of the upcoming Japan-U.S. summit scheduled for this month, the Bank of Japan could potentially raise interest rates as early as March. In an interview on Friday, Sakurai suggested that Sanae Takaichi might seek the BOJ's assistance in curbing yen depreciation. He noted that the fact Washington conducted a rate check last month to support the yen signals a U.S. preference for a stronger yen against the dollar. "Currency intervention only has a temporary effect in countering yen selling pressure. The best way to address yen weakness is for the Bank of Japan to hike interest rates," stated Sakurai, who maintains close contact with current policymakers. He added that a renewed decline in the yen would elevate inflation through higher import costs, partially offsetting the downward pressure from government fuel subsidies. Sakurai further commented that, if needed to counter a sharp yen drop, the BOJ could justify a rate hike as soon as March by pointing to prospects for robust wage growth in the annual spring wage negotiations between companies and unions.
Separately, last month gold prices surged to a record high above $5,500 per ounce. While investment market demand was certainly a contributing factor, the largest buyers were unequivocally central banks. In recent years, central bank purchases have directly driven gold prices higher, although recent sharp price fluctuations may temporarily slow this demand. In a report last week, Goldman Sachs commodity analysts Lina Thomas and Daan Struyven noted, "In discussions with market participants, central bank reserve managers remain willing to buy gold to hedge against geopolitical and financial risks, but they prefer to delay purchases until prices stabilize." Goldman Sachs pointed out that increased market volatility is driven by private sector diversification demand, much of it manifested through gold option structures that amplify price swings. This volatility is making some emerging market central banks more hesitant to buy aggressively at current prices, even as they maintain a positive outlook on the market.
Key data to watch today includes the UK CBI Distributive Trades Survey for February and the U.S. CB Consumer Confidence Index for February.
Gold / USD Gold advanced significantly yesterday, reaching a 16-day peak, with the spot price currently trading near 5173. Support was provided by dovish comments from Federal Reserve officials, alongside weaker-than-expected U.S. economic data released during the session. Furthermore, heightened risk aversion fueled by new U.S. tariff policies also offered substantial support for the safe-haven asset. Resistance is anticipated near 5250 today, with support likely around 5100.
USD / JPY The USD/JPY pair moved lower in a consolidative manner yesterday, narrowly holding above the 154.00 level and hitting a 3-day low. The pair is currently trading around 155.30. The decline was partly due to profit-taking, while a softer U.S. dollar, pressured by dovish Fed rhetoric and weak economic data, also weighed on the pair. Additionally, hawkish remarks from Bank of Japan officials applied further downward pressure. Resistance is seen near 156.00 today, while support is expected around 154.50.
AUD / USD The Australian dollar edged lower in choppy trading yesterday, closing slightly down for the day. The pair is currently trading near 0.7050. The dip was attributed to profit-taking and technical selling pressure around the 0.7100 level. Increased risk aversion stemming from trade tensions also exerted some downward pressure. However, the losses were limited by a weaker U.S. dollar. Resistance is currently viewed near 0.7150, with support situated around 0.6950.
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