Economic Situation
The yen dominated the week. It takes 178.56 yen to buy one euro, versus 185.22 on August 31: the Japanese currency has gained 3.6% in two weeks, mainly during the past week. Japan is therefore paying noticeably more for trips than two weeks ago, on departures already booked.
The explanation lies not in the foreign exchange market but in the cost of money. For twenty years, borrowing in Japan cost almost nothing. The Bank of Japan has closed this chapter: on June 17 it raised its rate to 1.00%, and its governor Kazuo Ueda warned on September 2 that every meeting could lead to a new hike. Investors assign about a 79% chance of lifting it to 1.25% by Friday. Japanese capital is returning home, and borrowing costs rise elsewhere.
Japan is not alone in raising its rates, and the motive is the same everywhere: energy. In the euro area, prices rose 3.3% in August over twelve months, with energy alone up 14.3%. Hormuz remains closed since late February and the barrel price has advanced by nearly 9% in a week, to $104.61. On September 10, the European Central Bank raised its rate to 2.50%; the Fed, its American counterpart, is expected to follow suit on Wednesday.
Japan remains the most vulnerable, since it buys almost all of its energy from abroad: every dollar added to the price of crude feeds into the prices paid by Japanese households and leaves room for its central bank at Friday’s meeting. As long as Hormuz remains blocked, fuel and credit will stay expensive together. Winter budgets are therefore built on these two items, and on a yen that has ceased to be cheap.
The explanation lies not in the foreign exchange market but in the cost of money. For twenty years, borrowing in Japan cost almost nothing. The Bank of Japan has closed this chapter: on June 17 it raised its rate to 1.00%, and its governor Kazuo Ueda warned on September 2 that every meeting could lead to a new hike. Investors assign about a 79% chance of lifting it to 1.25% by Friday. Japanese capital is returning home, and borrowing costs rise elsewhere.
Japan is not alone in raising its rates, and the motive is the same everywhere: energy. In the euro area, prices rose 3.3% in August over twelve months, with energy alone up 14.3%. Hormuz remains closed since late February and the barrel price has advanced by nearly 9% in a week, to $104.61. On September 10, the European Central Bank raised its rate to 2.50%; the Fed, its American counterpart, is expected to follow suit on Wednesday.
Japan remains the most vulnerable, since it buys almost all of its energy from abroad: every dollar added to the price of crude feeds into the prices paid by Japanese households and leaves room for its central bank at Friday’s meeting. As long as Hormuz remains blocked, fuel and credit will stay expensive together. Winter budgets are therefore built on these two items, and on a yen that has ceased to be cheap.
Exchange Rates: The Technical Update
The Swiss franc and the yen usually play the same role on the market. This week, they moved in opposite directions. Against the yen, the euro fell from 181.59 to 178.56 in five sessions, a decline of 1.67%, while it rose 0.95% against the franc, with the rate moving from 0.9364 at the end of August to 0.9451 on Friday. Only one of the two central banks is active: Switzerland leaves its rate at 0% and repeats that it would intervene if its currency rose too much. Switzerland thus costs a bit less for the European buyer, while Japan is considerably more expensive.Elsewhere, nothing moves. The euro is worth 1.1592 dollars, down 0.26% from 1.1622 a week earlier. Both central banks raise rates together and neither takes the lead. The British pound follows, at 0.85815, with the Bank of England expected to keep rates unchanged at 3.75% on Thursday. Dollar and pound buying budgets remain calm.
One destination benefits from this rate race: Thailand. About 38.23 bahts per euro, nearly 3% higher than a year ago and at the top of its twelve-month range, between 36.21 and 38.72. The Thai central bank keeps its rate at 1% to support consumption, while almost all others are raising theirs: the baht therefore attracts little investor interest. A tour bought in Bangkok costs a little less than a year earlier, which is the exact opposite of Japan.
| WEEKLY SUPPORTS | WEEKLY RESISTANCES | |||
| S2 | S1 | R1 | R2 | |
| EUR/USD | 1.1450 | 1.1520 | 1.1660 | 1.1740 |
| EUR/GBP | 0.8490 | 0.8540 | 0.8630 | 0.8680 |
| EUR/CHF | 0.9360 | 0.9405 | 0.9490 | 0.9540 |
| EUR/CAD | 1.5900 | 1.5980 | 1.6140 | 1.6220 |
| EUR/JPY | 175.00 | 177.00 | 180.50 | 182.50 |
The supports and resistances shown below indicate respectively the lower and upper levels within which prices are expected to move over the course of the week.
The information presented in this publication is provided for purely informational purposes and does not constitute investment advice, a selling offer, nor a solicitation to buy, and should in no case be used as a basis or considered as an invitation to engage in any investment.
Mondial Change is a French financial institution, founded in 2015, specializing in managing international payments and exchange rate risk.
Mondial Change also supports many players in tourism, including travel agencies, tour-operators, group organizers, and receptive partners…
www.mondialchange.com
Contact: [email protected]
Mondial Change also supports many players in tourism, including travel agencies, tour-operators, group organizers, and receptive partners…
www.mondialchange.com
Contact: [email protected]
