Source – economictimes.indiatimes
Bitcoin surged to near one-month highs on Monday, continuing its upward momentum following the Federal Reserve’s significant rate cut last week. While the cryptocurrency gained strength, the Japanese yen and other major currencies remained mostly flat, with Japanese markets closed for the Autumnal Equinox holiday. The dollar, meanwhile, continued to strengthen against the yen, maintaining its lead after policy decisions in both the U.S. and Japan last week.
Bitcoin Surges After Fed’s Rate Cut
Bitcoin, the leading cryptocurrency, rose by 0.8% to trade above $63,200 on Monday, building on its recent gains. The Bitcoin surge was triggered by last week’s 50 basis point rate cut by the Federal Reserve, which aimed to calm fears of a U.S. recession. Bitcoin’s rise comes as investors shift toward riskier assets, including equities and commodity currencies, in the wake of the Fed’s aggressive monetary easing.
The U.S. dollar also showed strength, particularly against the Japanese yen, which stagnated following the Bank of Japan’s (BOJ) decision to keep interest rates unchanged last week. The dollar reached a two-week high against the yen at 144.50, before slightly easing to 144.08 on Monday. Meanwhile, the Australian dollar remained flat around $0.68, holding steady after its significant 3% rise over the past two weeks.
The broader market is now focused on the possibility of further Fed rate cuts. Futures traders are pricing in 75 basis points of cuts by the end of the year and nearly 200 basis points by December 2025, which would bring the Fed’s policy rate to 2.75% by then, according to CME’s FedWatch tool. The Federal Reserve’s decision appears to have boosted risk sentiment, helping Bitcoin and other risk assets maintain their upward momentum.
Goldman Sachs, in a note to clients, stated that the Fed’s rate cut “appears to have calmed market fears of a U.S. recession.” The investment bank’s analysts predict a slight rebound in the U.S. dollar over the next three months, though they expect it to weaken again over a six- to twelve-month horizon.
Yen Stagnates Amid BOJ’s Decision and Political Uncertainty
While Bitcoin and the dollar saw gains, the Japanese yen remained stagnant after last week’s BOJ meeting. The central bank kept interest rates unchanged, signaling no immediate plans to hike rates further, which paused the yen’s sharp gains from earlier in the month. The yen had appreciated 1.4% in September, but the BOJ’s decision, combined with Japan’s market closure for the holiday, kept the currency in check.
Political uncertainty in Japan also contributed to the yen’s stability, as the ruling Liberal Democratic Party prepares for a vote later this week to select a new prime minister to replace Fumio Kishida. Analysts believe that this political transition, coupled with the possibility of a snap election in October, will make the BOJ’s job more challenging in the coming months. The frontrunners for the prime minister position have expressed differing views on monetary policy, adding further uncertainty to Japan’s economic outlook.
Looking ahead, economists expect two additional 25 basis point rate cuts from the Federal Reserve by the end of the year, potentially adding more pressure to the yen. The BOJ’s decision to maintain its dovish stance, despite rising inflation concerns globally, may limit the yen’s ability to gain against the dollar in the short term.
As the global financial landscape continues to shift, Bitcoin remains a notable mover in the market, capitalizing on the Fed’s recent actions, while traditional currencies, like the yen, face challenges tied to both economic and political factors.
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