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These are exciting times for FOREX investors, as the US dollar is near its highest level since last November. This is when compared to other currencies such as the euro, which is at an eight-month low and the Japanese yen suffering as well.
On September 28th, the dollar index was slightly lower but still poised to enjoy 11 weeks of gains. The index gained 2.86% in September, the most considerable increase in a year. Even with ups and downs like the stock market, it’s a good year for the currency and there is a good chance that the financial trend will continue.
Not everything is terrible for the other currencies, though. For example, the euro grew 0.14% on September 28, but it’s still close to its low January value of $1.0482. Still, many analysts don’t believe parity with the dollar will happen.
As senior currency analysts at Mitsubishi UFJ Financial Group (MUFG), which is the second biggest financial group in the world in terms of holdings, mentioned, even if this happens, it will be short-term unless there’s a significant negative shock in Europe. This isn’t predicted or expected. According to MUFG, the reason for the euro weakening is higher US yields and historical reasons. As it turns out, the US economy strengthens whenever the European economy weakens.
Gaming Sector
Amid economic uncertainties, sports betting and online gambling continue to grow in the US, with notable revenues in various states, as reported by agamble.com. For instance, in April, New York saw a staggering $1.55 billion in sports betting revenue, significantly ahead of Illinois at $899 million, and New Jersey at $798 million. Despite the broader economic challenges, these figures reflect a strong interest and investment in sports betting across key states, showcasing the sector’s resilience and potential for growth.
The Situation with the Yen
Japan’s currency reached 149.39 per dollar on September 27, making it the weakest spot in 11 months. One of the reasons for this is the surge in oil prices. This surge in those prices was because of a substantial decrease in the United States’ crude oil reserves. This drop in reserves has added to concerns about the limited availability of oil on a global scale.
Another concern is that Japanese authorities intervened when the yen reached 150 per dollar last year. Besides, it can enter into speculative territory, meaning the currency movements won’t be based on economic fundamentals, which will distort its value.
If the yen becomes too volatile, the authorities would require more money to stabilise it, a situation Japan doesn’t want. John Vail, the chief global strategist at Nikko Asset Management, mentioned that Japan wants to avoid a breakout beyond this level to prevent excessive spending.
This is more evident in Japan’s Finance Minister Shunichi Suzuki’s declaration when mentioning that the country wouldn’t sit idly while the currency moves with excessive volatility.
It’s not only the yen and euro. The pound, at $1.2163, is around a six-month low, and the Swiss franc is at its lowest value since March.
Is There a Slowdown Looming Ahead?
According to economic data from Forbes, there are no expectations of a slowdown in the economy. However, it doesn’t mean it won’t be difficult. The Federal Open Markets Committee projected a GDP growth of just 1% for 2023, which could suggest that economic growth will decrease in a significant manner.
One of the reasons for this is the banking crisis at the beginning of 2023, which made credit conditions more difficult, leaving many companies unable to secure loans. And some consider the yield curve inversion as an indicator of a recession.
The yield curve inversion means the 2-year US Treasury note is above the yield of the 10-year Treasury note. This has been a strong recession indicator historically. Still, the 10-year yields are at 4.642%, the highest since 2007.
All eyes are on Jerome Powell, the Chair of the Federal Reserve of the US who will speak on Thursday September, 28. He may offer some information on monetary policy that will make it more transparent for everyone. Still, the fact that the USD enjoys high levels can be detrimental to some.
For instance, export businesses are at a disadvantage because they have less revenue. It can offer some respite for the local manufacturing sector that receives supplies from abroad. However, it remains to be seen if this offsets the hurdles of procuring loans and other important issues.
