The week got off to an eventful start, with sharp fluctuations in the yen on a holiday in Japan.

The currency plunged to a 34-year low of 160 per dollar before retreating sharply, prompting wild talk of intervention and, shortly thereafter, a steep rally.

Forex forecast: Bank of Japan intervention

No intervention was confirmed, but there was much talk of subtle warnings being issued as the decline accelerated after a lackluster meeting by the Bank of Japan.

Its chief currency diplomat Masato Kanda kept mum.

As of late on Friday (April 27), the dollar/yen rate had risen by as much as 2.8%, and overnight implied volatility in currency options had spiked above 17% for the first time this year.

Forex forecast: Yen rebounds

The yen had rebounded from 160 to just under 156 in London, but it remained weaker than it had been at the start of the trading day on Friday.

This is what Deutsche Bank means by Japan’s apparent ‘benign neglect’ of the weakening yen, although dollar-denominated energy imports and crosscurrents to the Asian competitive landscape underline the medium-term risks of a weak yen.

Forex forecast: Big meeting for Fed

It would appear that the Federal Reserve remains front and centre this week, with its meeting next to be marked with little fresh signs of a willingness to deliver multiple cuts to US rates this year – if press conference statement spin is to be believed.

This, after persistently warm inflation data arrived again, pushing the yearly easing forecast to just 35 bps, after the latest inflation gauge from the personal consumption expenditure price index was in line with forecasts, with no further deterioration in early-year price growth evident.

Forex forecast: Fed policy unchanged?

The Fed should leave its policy stance unchanged this week – at least, that’s the hope; it might even begin signalling a slowing of the balance sheet reduction that has plunged it back to life.

At the very least, it should soothe the tremors still shaking the Treasury market as 10-year yields return to levels that tripped the market in the latter part of last year and pushed long-term risk premia positive for the first time this year.

Forex forecast: US Payroll report

Meanwhile, outside the US, this week’s most influential economic indicators will come from the labour market, capped off by Friday’s powerful payroll report.

In corporate news, the second-busiest earnings week of the season follows last week’s biggest rally on Wall Street in almost two years, led by Microsoft, Alphabet and Tesla.

The week will bring crucial updates from Amazon on Tuesday and Apple on Thursday.

It’s another up day on Wall Street, with futures opening a few points higher after a positive session last Friday.

First-quarter profit growth for the S&P 500 earnings season has jumped to 5.6% from an originally expected 5.1%.

Meanwhile, Tesla has cleared regulatory obstacles in China – and is seen as having a better chance of offering its autonomous driving technology after a surprise visit by Elon Musk – Anglo American enjoyed gains after reports of a possible upgrade of its bid by BHP, and Atos jumped after a bid from the French state for several key units.

Deutsche Bank’s stock price dropped almost 4k on Friday as the company prepared to put aside money for legal expenses related to its takeover of Postbank, which could harm the bank’s outlook for the year.

Forex forecast: US Treasury estimate

Among the main US economic indicators due for release today are the Dallas Fed’s manufacturing survey for April; the Treasury’s estimates of how much it will need to borrow in each of the next three quarters.

Earnings reports for Paramount Global and Domino’s Pizza; and a speech by the board member of the European Central Bank, Luis De Guindos.

Forex forecast: Rand trades fairly against USD

The rand fared well in early trading on Monday, up 0.29% against the dollar at 18.7525 at 0726 GMT, before the release of a raft of domestic economic data later on in the day, and a key Federal Reserve policy review later in the week.

The currency ended the previous week on a positive note as a poll by the research firm Ipsos showed that the African National Congress remains the dominant political force, despite slightly slipping popularity.

Forex forecast: SA investors eye economy

Investors in South Africa are awaiting the release of economic indicators, including March money supply, trade and budget balance data, to get a greater sense of the health of the nation’s economy.

The dollar index slipped 0.33% in the broader currency market, based on the basket of major currencies.

The world is watching the Federal Open Market Committee (FOMC) meeting taking place on Wednesday, as forex forecasts and investors are anticipating the US central bank to slow down interest rate cuts.

Meanwhile, South Africa’s Top-40 and all-share indexes each climbed 0.5% in early session trading.

Furthermore, South Africa’s benchmark 2030 government bond was bid up, with its yield falling by 4 basis points to 10.745% in early deals.

Forex forecast alert: a week of financial and economic news where headlines in just a few hours could move markets materially on the global and local front.

On Monday, the yen shot up against the dollar, with forex prognosticators and traders consistently pointing to the Japanese authorities attempting to intervene in the market.

Forex forecast: Forex traders eye Yen

That brought the Japanese currency up from an early high of 160.245 to a low of 154.40 yen in response to what was widely seen as an attempt by Japanese banks to buy yen and sell dollars.

The dollar stabilized at around 156.22 yen.

According to The Wall Street Journal, Japanese financial authorities had bought yen in the forex market, although they stopped short of fully admitting this.

Rumours of intervention have been rife among traders, who have often speculated about intervention, especially as the yen is down 11% against the dollar this year, even as the Bank of Japan discontinued an extreme negative interest rate policy last month.

Although a massive shift, such as the one that took place in February, when Japan changed its target interest rate to near zero, is a significant development, forex predictions still see Japanese rates as rather low compared with the higher US rates.

This discrepancy keeps Japanese government bond yields much lower than US Treasuries, encouraging Japanese capital to continue to flow, as it has for decades, abroad. That keeps the pressure on the yen.

Forex forecast: Trends for Asian market

Masato Kanda, Japan’s chief currency diplomat, refused to confirm intervention but described recent markets movements as ‘speculative, rapid and abnormal’, adding that ‘you cannot just look at these trends and leave them alone.’ The Ministry of Finance was closed for a holiday and had no immediate comment.

speaking to the Financial Times, Nicholas Chia of Standard Chartered in Singapore said that if the intervention was genuine, it might be the first of many.

‘If the dollar/yen crosses 160 again, we might see further action,’ he said, adding that the 160 level was likely to be a key threshold for the Japanese authorities.

A lower yen helps Japanese exporters make their products cheaper abroad but it complicates the job of the policymakers by raising import costs and inflationary pressure.

As the Bank of Japan’s new governor Kazuo Ueda told reporters this week: ‘Monetary policy doesn’t target exchange rates directly, but fluctuations in the exchange rate can have a marked effect on the economy.

Forex forecasters are keeping an eye on the Federal Reserve’s next policy review – any shift in US rate expectations could move the yen even more.

The alleged forex intervention before that review likely reflect other forces at work in global currency markets.

Forex forecast: Euro currencies

Now that declines in inflation have plateaued and stronger US data are once again pushing back the Federal Reserve’s first rate cut, central European policymakers are stepping away from radical rate cuts, in the face of mounting challenges.

Thanks to last year’s steep decline in inflation in Poland, the Czech Republic and Hungary, central banks were able to slash interest rates aggressively this year, helping to revive economies that fell into recession – or stagflation – during the whiplash from the post-pandemic recovery and subsequent war-related recession.

However, the inflation rate was 2% in Poland and the Czech Republic, and 3.6% in Hungary in March.

The rate is expected to rise to roughly 5% in Poland and Hungary by the end of 2024 as temporary factors wane and subsidies are gradually phased out.

Forex forecast: Flagging currencies

The surge in oil prices, flagging currencies, stubbornly high services inflation and the anticipated pick-up of the economic recovery have made central banks reluctant to cut rates further.

As forex expectations have ratcheted down expectations for cuts in the developed world, they likewise cooled expectations for the emerging markets, the Allianz economists say.

Data from JP Morgan’s market analysis reveals a third of expected rate cuts for the Czech Republic and about half for Poland. Forex forecasts for Hungary show 65% of expected easing pulled back.

If the earlier part of the year projected rate cuts into the very end of 2024, now the same forecasts are rather much more conservative.

Their currencies, which are particularly exposed to inflation rates and the second-order effects of a stronger greenback, have been hit.

This can be seen in the delayed expectations for the Federal Reserve’s rate cuts, which have now been pushed back to September or later, in turn supporting the dollar and putting pressure on currencies such as the Czech crown and Hungarian forint in the