JPYIRR SHORT JPY weakness continues:Strong bearish
Updated
Iran’s currency hits record low amid tensions with the West
Depreciation of the rial comes amid boiling tensions with the West and continuing protests in Iran.
On Sunday, the United States dollar went past the 450,000-rial mark for the first time on the open market.
On Sunday, the central bank said it will soon raise the maximum amount of currency that can be sold to an individual annually from 2,000 euros ($2,176) to 5,000 euros ($5,439) in an apparent effort to show it has no shortage of currency.
The cap was introduced after the US unilaterally abandoned the 2015 Iran nuclear deal with world powers in 2018 and imposed harsh sanctions, triggering a new currency crisis in Iran.
To combat currency devaluation, Iran’s police force has periodically announced the arrest of dozens of currency speculators in recent months.
Japan's Finance Minister Shunichi Suzuki kept up verbal warnings on Tuesday against the yen's depreciation, saying he would respond appropriately if currency moves became excessive.
At the end the interest rates differential between 2 countries are important.
Which country offers more interest rates for your money? That currency is the winner
Depreciation of the rial comes amid boiling tensions with the West and continuing protests in Iran.
On Sunday, the United States dollar went past the 450,000-rial mark for the first time on the open market.
On Sunday, the central bank said it will soon raise the maximum amount of currency that can be sold to an individual annually from 2,000 euros ($2,176) to 5,000 euros ($5,439) in an apparent effort to show it has no shortage of currency.
The cap was introduced after the US unilaterally abandoned the 2015 Iran nuclear deal with world powers in 2018 and imposed harsh sanctions, triggering a new currency crisis in Iran.
To combat currency devaluation, Iran’s police force has periodically announced the arrest of dozens of currency speculators in recent months.
Japan's Finance Minister Shunichi Suzuki kept up verbal warnings on Tuesday against the yen's depreciation, saying he would respond appropriately if currency moves became excessive.
At the end the interest rates differential between 2 countries are important.
Which country offers more interest rates for your money? That currency is the winner
Note
US crude oil inventories fell by 9.603 million barrels in the week ending June 23, 2023, more than market expectations of a 1.757 million draw, data from the EIA Petroleum Status Report showed. Crude stocks at the Cushing, Oklahoma delivery hub rose by 1.209 million barrels, following a 98 thousand decrease in the previous period. Meanwhile, distillate stockpiles, which include diesel and heating oil, went up by 0.124 million barrels, less than the consensus for a 0.782 million rise and gasoline inventories increased by 0.603 million, compared with forecasts of a 0.126 million drop.Fed Chair. Powell reiterated at the ECB Forum on Central Banking that interest rates will rise further and that he wouldn’t take moving in consecutive meetings off the table at all, but noted that a recession in the US is not the most likely case. Nvidia was down by over 2% and Advanced Micro Devices by 1% after the Wall Street Journal reported that the US government is considering new restrictions on exports of artificial intelligence chips to China. The Fed is also due to release the results of its annual stress tests to banks, and more details on Basel III Endgame and changes to bank supervision will be in the spotlight.
The Dow Jones was down over 100 points and the S&P 500 dipped by 0.1% on Wednesday afternoon, on the prospect of further interest rate hikes following the Federal Reserve's chair Powell Speech at the ECB Forum. He said he does not see inflation reaching the Fed's 2% target any time soon. He reiterated that interest rates will rise further and did not rule out a boost in the cost of borrowing at the next policy meeting scheduled for the end of July. Meantime, the Nasdaq was up 0.2% powered by megacap momentum stocks. Among stocks, shares of Nvidia and Advanced Micro Devices were down by 2% and 1%, respectively, after the US government is considering new restrictions on exports of AI chips to China. Intel, Applied Materials and Qualcomm fell more than 2% each. On the other hand, Apple hit an all-time high of $189.8 during the session, while shares of Tesla and Alphabet advanced 1.4% and 2.5%. The Fed is due to release the results of its annual stress tests to banks.
UK stocks rose 0.5% on Wednesday, driven by financial and industrial stocks. Sage Group surged by over 5% after an upgrade from JP Morgan. Investment banks gained 2%, construction stocks advanced 2.5%, while precious metal miners dipped 1%. Among single stocks, Revolution Beauty rose 29% as trading resumed, and Vodafone gained 1.4% on a rating upgrade. On the other hand, Ocado dropped 5% on a report denying Amazon's bid speculation. Meanwhile, Bank of England Governor Andrew Bailey said last week's rise in interest rates reflected a resilient economy and unexpectedly persistent inflation.
The yield on the US 10-year Treasury note hovered around 3.7% in the last week of June, as investors weigh fresh economic data pointing to a resilient economy and prospects that interest rates will continue to march higher. Fed Chair Powell reiterated at the ECB Forum on Central Banking that interest rates will rise further and that he wouldn’t take moving in consecutive meetings off the table at all, but noted that a recession in the US is not the most likely case. Market participants are currently assigning a nearly 84% chance the Fed will deliver a 25bps increase in the fed funds rate in July. The focus now shifts to fresh PCE inflation due Friday.
Note
Iran Gasoline Prices at 0.36 USD/LiterIran - Credit Rating at 15.00
Iran Steel Production at 3300.00 Thousand Tonnes
Iran Crude Oil Production at 2679.00 BBL/D/1K
Iran Crude Oil Rigs at 117.00
Iran Military Expenditure at 6846.60 USD Million
Iran Youth Unemployment Rate at 26.90 percent
Iran Food Inflation at 78.50 percent
Iran Consumer Price Index (CPI) at 514.20 points
Iran Inflation Rate at 54.60 percent
Japanese Yen Iranian Toman traded at 291.042 this Friday June 30th, increasing 0.754 or 0.26 percent since the previous trading session. Looking back, over the last four weeks, JPYIRR gained 3.13 percent. Over the last 12 months, its price fell by 5.94 percent. Looking ahead, we forecast Japanese Yen Iranian Toman to be priced at 287.862 by the end of this quarter and at 274.838 in one year, according to Trading Economics global macro models projections and analysts expectations.
Note
The factors driving the price of the Japanese yen (JPY) and the Iranian rial (IRR) can differ significantly due to the unique circumstances and dynamics of each currency. Here's an overview of the key factors that may be influencing the two currencies:Japanese Yen (JPY):
Interest Rate Differentials: The interest rate differential between Japan and other countries can impact the value of the yen. If the Bank of Japan raises interest rates or signals a shift towards tightening monetary policy, it can attract foreign capital inflows, leading to an appreciation of the yen. Conversely, if the interest rates in Japan are lower compared to other countries, it may weaken the yen.
Safe-Haven Status: The yen is often considered a safe-haven currency. During times of global uncertainty or market volatility, investors may seek the relative safety of the yen, leading to an increase in its value. Factors such as geopolitical tensions, economic instability, or risk-off sentiment in global markets can drive demand for the yen.
Economic Data and Monetary Policy: Economic indicators, including GDP growth, inflation rates, employment data, and monetary policy decisions by the Bank of Japan, can impact the yen. Positive economic data or indications of tighter monetary policy can strengthen the yen, while weak economic performance or accommodative monetary policy can weaken it.
Carry Trade and Risk Appetite: The yen is commonly involved in carry trades, where investors borrow in low-yielding currencies (like the yen) and invest in higher-yielding currencies or assets. Risk sentiment and market expectations for interest rates can influence carry trade activity, impacting the demand and supply dynamics of the yen.
Iranian Rial (IRR):
Economic and Political Developments: Economic and political factors play a significant role in the value of the Iranian rial. Economic indicators, such as inflation rates, economic growth, fiscal policies, and trade conditions, can impact the currency. Additionally, political stability, sanctions, and geopolitical tensions can affect the rial's value.
Government Policies and Intervention: Government policies, such as monetary policy decisions, foreign exchange regulations, and interventions by the Central Bank of Iran, can influence the value of the rial. These measures can include actions to stabilize the currency, manage inflation, control capital flows, or support foreign exchange reserves.
Sanctions and International Relations: Iran has faced various economic sanctions that have had a significant impact on its currency. Changes in international relations, diplomatic developments, or shifts in sanctions policies by other countries can affect the value of the rial.
Supply and Demand Dynamics: Market forces of supply and demand for the rial in domestic and international markets can impact its value. Factors such as foreign investment flows, trade balances, and market sentiment towards the Iranian economy can influence the demand for the currency.
It's important to note that currency exchange rates are influenced by multiple complex factors, and their movements can be difficult to predict accurately. The interplay of these factors, along with market speculation and investor sentiment, can lead to fluctuations in currency values. Monitoring economic and political developments, central bank actions, and global market trends can provide insights into the factors driving the value of the Japanese yen and the Iranian rial.
Note
A weak Japanese yen can have both positive and negative impacts on Japan's economy. Here are some reasons why a weak yen can be beneficial for Japan:1. Export Competitiveness: A weak yen makes Japanese exports more affordable and competitive in international markets. When the yen depreciates, it lowers the price of Japanese goods and services in foreign currencies. This can stimulate export growth and increase the competitiveness of Japanese industries, particularly those heavily reliant on exports such as automotive, electronics, and machinery. Strong exports contribute to economic growth, increase production, and support job creation in Japan.
2. Tourism and Services: A weak yen can attract more tourists to Japan as travel and accommodation expenses become relatively cheaper for foreign visitors. This boosts the tourism industry and generates revenue through spending on services, accommodation, dining, and shopping. Additionally, a weak yen can make Japanese services, such as consulting, entertainment, and technology, more affordable and attractive to international clients, potentially boosting service exports.
3. Corporate Profits: Japanese companies that earn a significant portion of their revenues in foreign currencies benefit from a weak yen. When they repatriate their overseas earnings, the weaker yen allows them to convert those earnings into more yen, resulting in higher profits. This can positively impact corporate performance, stock prices, and investment activities within Japan.
However, a weak Japanese yen can also have negative consequences for Japan:
1. Imported Inflation: Japan imports a considerable amount of raw materials, energy, and commodities. A weak yen makes imports more expensive, which can lead to increased costs of production and imported inflation. This can potentially erode consumers' purchasing power and squeeze corporate profit margins.
2. Higher Import Bill: As mentioned earlier, Japan relies heavily on energy imports, particularly oil and gas. A weak yen raises the cost of importing these energy resources, which can have a negative impact on Japan's trade balance and current account surplus.
3. Consumer Price Deflation: Japan has been struggling with persistent deflationary pressures for many years. A weak yen can exacerbate deflationary tendencies by reducing the cost of imports and potentially leading to a decline in domestic prices. Deflation can dampen consumer spending and business investment, posing challenges to economic growth and the effectiveness of monetary policy.
It's important to note that the impact of a weak yen on Japan's economy is not uniform across all sectors and stakeholders. Different industries and individuals may be affected differently depending on their exposure to international trade, import/export dynamics, and overall economic conditions.
Note
The factors driving the price of the Japanese yen (JPY) and the Iranian rial (IRR) can differ significantly due to the unique circumstances and dynamics of each currency. Here's an overview of the key factors that may be influencing the two currencies:Japanese Yen (JPY):
1. Interest Rate Differentials: The interest rate differential between Japan and other countries can impact the value of the yen. If the Bank of Japan raises interest rates or signals a shift towards tightening monetary policy, it can attract foreign capital inflows, leading to an appreciation of the yen. Conversely, if the interest rates in Japan are lower compared to other countries, it may weaken the yen.
2. Safe-Haven Status: The yen is often considered a safe-haven currency. During times of global uncertainty or market volatility, investors may seek the relative safety of the yen, leading to an increase in its value. Factors such as geopolitical tensions, economic instability, or risk-off sentiment in global markets can drive demand for the yen.
3. Economic Data and Monetary Policy: Economic indicators, including GDP growth, inflation rates, employment data, and monetary policy decisions by the Bank of Japan, can impact the yen. Positive economic data or indications of tighter monetary policy can strengthen the yen, while weak economic performance or accommodative monetary policy can weaken it.
4. Carry Trade and Risk Appetite: The yen is commonly involved in carry trades, where investors borrow in low-yielding currencies (like the yen) and invest in higher-yielding currencies or assets. Risk sentiment and market expectations for interest rates can influence carry trade activity, impacting the demand and supply dynamics of the yen.
Iranian Rial (IRR):
1. Economic and Political Developments: Economic and political factors play a significant role in the value of the Iranian rial. Economic indicators, such as inflation rates, economic growth, fiscal policies, and trade conditions, can impact the currency. Additionally, political stability, sanctions, and geopolitical tensions can affect the rial's value.
2. Government Policies and Intervention: Government policies, such as monetary policy decisions, foreign exchange regulations, and interventions by the Central Bank of Iran, can influence the value of the rial. These measures can include actions to stabilize the currency, manage inflation, control capital flows, or support foreign exchange reserves.
3. Sanctions and International Relations: Iran has faced various economic sanctions that have had a significant impact on its currency. Changes in international relations, diplomatic developments, or shifts in sanctions policies by other countries can affect the value of the rial.
4. Supply and Demand Dynamics: Market forces of supply and demand for the rial in domestic and international markets can impact its value. Factors such as foreign investment flows, trade balances, and market sentiment towards the Iranian economy can influence the demand for the currency.
It's important to note that currency exchange rates are influenced by multiple complex factors, and their movements can be difficult to predict accurately. The interplay of these factors, along with market speculation and investor sentiment, can lead to fluctuations in currency values. Monitoring economic and political developments, central bank actions, and global market trends can provide insights into the factors driving the value of the Japanese yen and the Iranian rial.
Note
Here are a few more factors that can influence the Japanese yen (JPY) and the Iranian rial (IRR):Japanese Yen (JPY): 5. Trade and Current Account: Japan is a major exporter, and the performance of its trade sector can impact the yen. A strong export performance and trade surplus can contribute to yen appreciation, as it reflects increased demand for Japanese goods and services, leading to a higher demand for the currency. Conversely, a widening trade deficit may put downward pressure on the yen.
6. Market Sentiment and Risk Aversion: Market sentiment and risk appetite can affect the yen's value. In times of risk aversion, when investors are concerned about global economic stability or financial market volatility, they tend to move towards safe-haven assets like the yen. As a result, the yen can strengthen. Conversely, during periods of risk-on sentiment, when investors are more willing to take on risk, the yen may weaken.
Iranian Rial (IRR): 5. Oil Prices and Energy Sector: Iran is a significant oil producer, and oil prices can have a significant impact on the Iranian economy and the value of the rial. Changes in global oil prices can affect Iran's export revenue, fiscal position, and overall economic stability, which can indirectly influence the rial.
6. Economic Reforms and International Relations: Iran's efforts to implement economic reforms, improve business conditions, attract foreign investment, and enhance its international relations can influence the value of the rial. Positive developments in these areas may boost investor confidence and contribute to rial appreciation.
7. Black Market and Exchange Rate Policies: The existence of a black market for foreign exchange can impact the value of the rial. In countries with restricted or multiple exchange rates, discrepancies between official and unofficial exchange rates can create arbitrage opportunities, affecting the supply and demand dynamics of the currency.
It's important to note that the currency exchange market is highly complex, and the interplay of these factors can change over time. Additionally, speculative trading, market psychology, and unexpected events can also impact currency values. Monitoring economic indicators, policy decisions, geopolitical developments, and global market trends can provide further insights into the factors driving the Japanese yen and the Iranian rial.
Note
Here are a few additional factors that can influence the Japanese yen (JPY) and the Iranian rial (IRR):Japanese Yen (JPY): 7. Monetary Policy: The monetary policy decisions of the Bank of Japan (BOJ) can have a significant impact on the yen. Changes in interest rates, quantitative easing measures, or other monetary policy tools employed by the central bank can influence investor sentiment and the value of the yen.
8. Economic Data: Economic indicators such as GDP growth, inflation, employment data, and consumer sentiment in Japan can affect the yen. Positive economic data can contribute to yen appreciation, indicating a healthy and growing economy, while negative data can lead to yen depreciation.
Iranian Rial (IRR): 8. Economic Sanctions: Iran has faced economic sanctions from the international community in the past, which have had a significant impact on the Iranian economy and the value of the rial. The lifting or imposition of sanctions can affect Iran's trade, investment, and access to international markets, influencing the value of the currency.
9. Political Stability: Political stability or instability in Iran can impact investor confidence and, consequently, the value of the rial. Political developments, government policies, and geopolitical tensions can create uncertainty and affect the currency's value.
10. Capital Flows and Foreign Investment: The flow of capital into and out of Iran, including foreign direct investment and portfolio investment, can influence the value of the rial. Increased foreign investment can strengthen the currency, while capital outflows can put downward pressure on its value.
It's important to note that currency exchange rates are also influenced by global macroeconomic trends, such as interest rate differentials, geopolitical events, market speculation, and investor sentiment towards emerging markets. Moreover, the interplay of these factors can change over time, so it's crucial to stay informed about the latest economic and political developments in both Japan and Iran to gain a comprehensive understanding of the drivers behind the movements in their respective currencies.
Japan and Iran have a history of economic and diplomatic relations that have created interdependencies between the two countries. Here are a few reasons why Japan and Iran have developed a level of dependence on each other:
1. Energy Imports: Japan is highly dependent on energy imports to meet its domestic energy needs, and Iran is one of the major oil producers in the world. Historically, Japan has been one of the largest buyers of Iranian oil, and this energy trade has created a significant economic relationship between the two countries. Japan relies on Iranian oil to fuel its industries and sustain its economy.
2. Trade and Investment: Japan and Iran engage in bilateral trade and investment activities. Japan exports machinery, vehicles, and electronic equipment to Iran, while importing oil and gas from Iran. These trade relations contribute to the economic interdependence between the two countries.
3. Infrastructure Development: Japanese companies have been involved in infrastructure development projects in Iran, such as transportation, energy, and telecommunications. Japan's expertise in infrastructure development and its willingness to invest in Iran's infrastructure projects have created economic ties and mutual interests.
4. Technological Cooperation: Japan has advanced technological capabilities, and Iran has sought to leverage Japan's expertise in sectors such as manufacturing, automotive, and electronics. Technological cooperation and knowledge transfer have played a role in the relationship between the two countries.
5. Political and Diplomatic Engagement: Japan and Iran have maintained diplomatic relations and engaged in political dialogue. These interactions have aimed to strengthen bilateral ties and promote cooperation in various areas, including economics, trade, and cultural exchange.
It's important to note that the level of dependence between Japan and Iran can fluctuate over time based on geopolitical factors, international relations, economic conditions, and policy decisions. Moreover, Japan's energy needs and diversification strategies, as well as global energy market dynamics, can influence its reliance on Iranian oil.
Note
A weak Iranian rial (IRR) can have both positive and negative implications for Iran's economy. Here are some reasons why a weak rial can be beneficial for Iran:Export Competitiveness: A weak rial makes Iranian goods and services more affordable and competitive in international markets. When the rial depreciates, it lowers the price of Iranian exports in foreign currencies. This can stimulate export growth and support industries such as oil, petrochemicals, agriculture, and manufacturing. Increased exports can generate foreign exchange earnings, boost economic activity, and contribute to employment and income generation in Iran.
Tourism and Services: A weak rial can make Iran an attractive destination for foreign tourists as travel expenses become relatively cheaper. This can stimulate the tourism industry and generate revenue through spending on accommodations, transportation, dining, and sightseeing. Furthermore, a weak rial can make Iranian services, such as medical tourism and educational services, more affordable and appealing to international clients.
Remittances: Iran has a significant number of citizens living and working abroad who send remittances back to their families. A weak rial increases the value of these remittances when converted into the local currency. This can provide support to household incomes, consumption, and overall economic stability.
However, a weak Iranian rial can also have negative consequences for Iran:
Inflationary Pressures: A weak rial can contribute to inflationary pressures by increasing the cost of imported goods, including essential commodities, raw materials, and consumer products. This can erode purchasing power, reduce living standards, and affect the affordability of imported goods for businesses and consumers.
Import Dependency: Iran relies on imports for various goods, including machinery, technology, and food items. A weak rial raises the cost of importing these goods, which can negatively impact businesses, industries, and consumers dependent on imported products. It can also strain the country's trade balance and foreign exchange reserves.
Economic Stability: A weak rial can create uncertainty and volatility in the financial markets, which can hamper investment, economic planning, and overall stability. It may also lead to capital flight, as individuals and businesses seek to protect their wealth by converting rials into more stable currencies.
It's important to consider that the impact of a weak rial is not uniform across all sectors and segments of the population. Different industries, businesses, and individuals may experience varying effects depending on their exposure to international trade, import/export dynamics, and overall economic conditions. Additionally, government policies and interventions can influence how the weakness or strength of the rial is managed and its impact on the economy.
Note
Here are a few more factors to consider regarding the impact of a weak Iranian rial on Iran's economy:Government Finances: Iran is an oil-exporting country, and a weak rial can benefit the government's finances in terms of oil revenue. As oil is priced in US dollars, a weaker rial means the government receives more rials for each dollar of oil sold. This can help boost government revenues, support budgetary needs, and potentially alleviate fiscal pressures.
Investment and Capital Inflows: A weak rial may make Iran an attractive destination for foreign direct investment (FDI) and foreign capital inflows. Foreign investors can take advantage of lower asset prices, such as real estate, stocks, or businesses, making investments relatively cheaper. This can stimulate investment activity, job creation, and economic growth in Iran.
Domestic Manufacturing and Industries: A weak rial can encourage domestic production and industrial activities by making imported inputs and raw materials relatively more expensive. This can incentivize local businesses to rely on domestically sourced materials and reduce their dependence on imports. It can also create opportunities for import substitution industries to develop, which can lead to self-sufficiency and enhance the resilience of Iran's economy.
On the other hand, here are a few reasons why a weak Iranian rial can be detrimental to Iran's economy:
Imported Inflation: As mentioned earlier, a weak rial can increase the cost of imported goods, including essential commodities and consumer products. This can lead to higher inflation rates, which erode the purchasing power of households and reduce their standard of living. It can be particularly burdensome for low-income individuals who spend a larger proportion of their income on basic necessities.
Dependence on Imports: Iran relies on imports for various goods, including advanced technology, machinery, and specialized equipment. A weak rial can increase the cost of importing these items, making it more challenging for businesses to access the necessary tools and technologies to remain competitive. It can hinder technological advancements, productivity growth, and overall economic development.
Balance of Payments and External Debt: A weak rial can put pressure on Iran's balance of payments, especially if the country's export earnings are insufficient to cover its import expenses. This can lead to a widening trade deficit and increased reliance on external borrowing to finance the deficit. If not managed effectively, a growing external debt burden can create financial vulnerabilities and limit the country's economic options in the long run.
It's worth noting that the impact of a weak rial on Iran's economy is influenced by various interconnected factors, including government policies, global market conditions, international sanctions, and geopolitical dynamics. Additionally, the effectiveness of exchange rate policies and economic management plays a crucial role in determining how the advantages and disadvantages of a weak rial manifest in the overall economy.
Note
Here are a few more points to consider regarding the impact of a weak Iranian rial on Iran's economy:Trade Competitiveness: A weak rial can make Iranian exports more competitive in international markets. As the value of the currency decreases, Iranian goods become relatively cheaper for foreign buyers, potentially boosting export volumes. This can help increase export revenues, support domestic industries, and contribute to economic growth.
Tourism and Services Sector: A weak rial can make Iran an attractive destination for foreign tourists and travelers. As the cost of travel and services becomes relatively cheaper, it can encourage an influx of visitors, leading to increased tourism revenues. This can benefit sectors such as hospitality, transportation, restaurants, and other service-oriented industries, providing employment opportunities and economic stimulus.
Remittances: Iran has a significant diaspora living abroad, particularly in countries such as the United States, Canada, and European nations. A weak rial can make it more favorable for Iranians living abroad to send remittances back to their home country. Increased remittance inflows can provide a source of foreign currency and contribute to household incomes and consumption.
On the other hand, here are a few reasons why a weak Iranian rial can be detrimental to Iran's economy:
Import Dependency: Iran relies on imports for various essential goods, including food, medicine, and energy products. A weak rial can increase the cost of importing these items, leading to higher prices for consumers and potential shortages if the country faces difficulties in accessing foreign currency. This can impact the population's well-being and social stability.
Capital Flight: A weak rial can erode confidence in the domestic currency and prompt individuals and businesses to move their assets out of Iran to preserve their value. Capital flight can result in a loss of investment, reduced domestic economic activity, and a further weakening of the currency, creating a negative cycle for the economy.
Financial Stability: A weak rial can pose challenges to the stability of Iran's financial system. It can increase the risk of inflationary pressures, reduce the value of savings and deposits held in rials, and lead to currency volatility. This can undermine investor confidence, limit access to credit, and hinder long-term economic growth.
Note
Inflationary Pressures: A weak rial can contribute to inflationary pressures within the Iranian economy. When the value of the currency declines, it can lead to higher prices for imported goods, raw materials, and intermediate inputs. This, in turn, can push up overall price levels, reducing purchasing power for consumers and potentially eroding living standards.Dependency on Imports: Iran's domestic production capacity may not be sufficient to meet all its needs, particularly for technologically advanced goods and certain consumer products. A weak rial makes imports more expensive, which can further deepen the country's dependency on foreign goods and services. This can have long-term implications for Iran's industrial and technological development.
Economic Uncertainty and Investment: A weak currency can create economic uncertainty, making it challenging for businesses to plan and invest in the future. Fluctuating exchange rates and the risk of further depreciation may deter both domestic and foreign investment, as investors seek more stable environments to protect their capital. This can impede economic growth and hinder the development of key industries.
Socioeconomic Inequality: A weak rial can exacerbate socioeconomic inequality within Iran. As prices rise due to inflationary pressures, vulnerable populations with limited purchasing power may find it increasingly difficult to afford basic necessities. This can deepen income disparities and contribute to social unrest and political instability.
Confidence and Reputation: A weak currency can affect Iran's reputation in international markets and erode confidence in its economic policies. It may lead to perceptions of economic instability and increase the risk associated with engaging in business transactions with Iranian entities. This can negatively impact foreign direct investment, trade relationships, and overall economic cooperation with other countries.
It's important to note that the impact of a weak currency on an economy is not always straightforward, and there can be both positive and negative consequences depending on various factors. Economic policies, structural reforms, and the ability to effectively manage and stabilize the currency can play significant roles in mitigating the adverse effects and harnessing potential benefits.
Note
Here are some potential impacts of a weak Iranian rial on various neighboring countries, oil exporting countries, oil importing countries, European and Western countries, Asia countries, and countries that impose sanctions on Iran. Additionally, I'll also discuss the potential impacts of a strong or stronger Iranian rial:Impacts of Weak Iranian Rial:
1. Neighboring Countries: A weak Iranian rial can have mixed effects on neighboring countries. It may lead to increased cross-border trade as Iranian goods become relatively cheaper for neighboring countries. However, it can also lead to economic challenges for countries heavily reliant on trade with Iran, as Iran may have reduced purchasing power for their exports.
2. Oil Exporting Countries: For oil-exporting countries, a weak Iranian rial can potentially increase their competitiveness in the global oil market. If Iran's oil exports become relatively cheaper due to the weak currency, it may put pressure on other oil-exporting countries to adjust their prices or compete more aggressively.
3. Oil Importing Countries: Oil-importing countries may benefit from a weak Iranian rial as it can lower their import costs of Iranian oil. This can positively impact their trade balance and reduce their energy expenses. However, this assumes that Iran continues to export oil despite potential economic challenges caused by the weak currency.
4. European and Western Countries: A weak Iranian rial can affect European and Western countries in several ways. It may increase the cost of imports from Iran, potentially leading to higher prices for Iranian goods in those markets. Additionally, it can impact trade volumes and economic cooperation with Iran, depending on the specific sanctions and restrictions in place.
5. Asian Countries: The impact of a weak Iranian rial on Asian countries can vary depending on their trade relationships with Iran. Asian countries that import goods from Iran may benefit from lower import costs, while those exporting to Iran may face challenges due to reduced purchasing power and demand.
6. Countries Sanctioning Iran: Countries that impose sanctions on Iran may see limited direct impact from a weak Iranian rial, as their trade and economic interactions with Iran are already restricted. However, it can indirectly impact their policies and strategies towards Iran, potentially influencing the effectiveness of sanctions and diplomatic efforts.
Impacts of Strong or Stronger Iranian Rial:
1. Iran's Economy: A strong or stronger Iranian rial can have positive impacts on Iran's economy. It can help reduce inflationary pressures by making imported goods cheaper, stabilize prices, and improve the purchasing power of Iranian consumers. It may also attract foreign investment and improve economic stability.
2. Neighboring and Trade Partner Countries: A strong Iranian rial can benefit neighboring and trade partner countries by making Iranian exports relatively more expensive. This can improve the competitiveness of their own industries and reduce the trade deficit with Iran. However, it may also lead to a decline in trade volumes if Iranian goods become less affordable.
3. Oil Importing Countries: For oil-importing countries, a strong Iranian rial may increase the cost of Iranian oil, potentially impacting their energy expenses and trade balance. However, it can also provide stability to the global oil market if Iran's oil exports are significant.
4. European and Western Countries: A strong Iranian rial can reduce the cost of importing Iranian goods for European and Western countries. This can positively impact trade volumes and economic cooperation, potentially opening up new business opportunities and markets.
5. Asian Countries: The impact of a strong Iranian rial on Asian countries can depend on their trade relationships with Iran. If they are importers of Iranian goods, a strong rial may increase the cost of imports. On the other hand, if they export goods to Iran, a strong rial can enhance their competitiveness and increase export opportunities.
It's important to note that the actual impacts may vary depending on various factors, including the specific economic conditions, trade relationships, and policies implemented by the countries involved. Additionally, geopolitical considerations, sanctions regimes, and global market dynamics can also influence the outcomes.
Note
Here are a few more points to consider regarding the impact of a weak Iranian rial on Iran's economy:10. Trade Competitiveness: A weak rial can make Iranian exports more competitive in international markets. As the value of the currency decreases, Iranian goods become relatively cheaper for foreign buyers, potentially boosting export volumes. This can help increase export revenues, support domestic industries, and contribute to economic growth.
11. Tourism and Services Sector: A weak rial can make Iran an attractive destination for foreign tourists and travelers. As the cost of travel and services becomes relatively cheaper, it can encourage an influx of visitors, leading to increased tourism revenues. This can benefit sectors such as hospitality, transportation, restaurants, and other service-oriented industries, providing employment opportunities and economic stimulus.
12. Remittances: Iran has a significant diaspora living abroad, particularly in countries such as the United States, Canada, and European nations. A weak rial can make it more favorable for Iranians living abroad to send remittances back to their home country. Increased remittance inflows can provide a source of foreign currency and contribute to household incomes and consumption.
On the other hand, here are a few reasons why a weak Iranian rial can be detrimental to Iran's economy:
13. Import Dependency: Iran relies on imports for various essential goods, including food, medicine, and energy products. A weak rial can increase the cost of importing these items, leading to higher prices for consumers and potential shortages if the country faces difficulties in accessing foreign currency. This can impact the population's well-being and social stability.
14. Capital Flight: A weak rial can erode confidence in the domestic currency and prompt individuals and businesses to move their assets out of Iran to preserve their value. Capital flight can result in a loss of investment, reduced domestic economic activity, and a further weakening of the currency, creating a negative cycle for the economy.
15. Financial Stability: A weak rial can pose challenges to the stability of Iran's financial system. It can increase the risk of inflationary pressures, reduce the value of savings and deposits held in rials, and lead to currency volatility. This can undermine investor confidence, limit access to credit, and hinder long-term economic growth.
16. Inflationary Pressures: A weak rial can contribute to inflationary pressures within the Iranian economy. When the value of the currency declines, it can lead to higher prices for imported goods, raw materials, and intermediate inputs. This, in turn, can push up overall price levels, reducing purchasing power for consumers and potentially eroding living standards.
17. Dependency on Imports: Iran's domestic production capacity may not be sufficient to meet all its needs, particularly for technologically advanced goods
Note
Positive Impacts of Weak Iranian Rial:Tourism: A weak Iranian rial can make Iran a more affordable destination for international tourists, potentially boosting the tourism industry and generating foreign exchange earnings.
Remittances: Iranians living abroad may find it more advantageous to send remittances back home when the Iranian rial is weak, as their foreign currency can have a greater purchasing power within Iran.
Competitiveness of Non-Oil Exports: A weak Iranian rial can enhance the competitiveness of non-oil exports from Iran, as they become relatively cheaper in international markets. This can potentially stimulate export-oriented industries and diversify the economy.
Negative Impacts of Weak Iranian Rial:
Inflation: A weak Iranian rial can contribute to inflationary pressures in the domestic economy. As the cost of imported goods rises, it can increase the overall price level, making everyday goods and services more expensive for Iranian consumers.
Imports and Consumer Goods: With a weak currency, the cost of importing goods from abroad becomes higher. This can lead to reduced availability and affordability of imported consumer goods, impacting the purchasing power and living standards of Iranians.
Capital Flight and Investment: A weak Iranian rial can erode confidence in the domestic currency, leading to capital flight as individuals and businesses seek to convert their rial holdings into more stable currencies. This can hinder domestic investment and economic growth.
Debt Burden: If Iran has borrowed in foreign currencies, a weak rial can increase the burden of servicing and repaying foreign debt, as the cost in domestic currency rises.
Positive Impacts of Strong or Stronger Iranian Rial:
Price Stability: A strong or stronger Iranian rial can contribute to price stability by reducing inflationary pressures. It can help stabilize prices of imported goods and services, making them more affordable for Iranian consumers.
Imports: A strong rial can improve the affordability of imported goods, enhancing the availability and variety of consumer products in the domestic market.
Reduced Import Costs: Iranian businesses that rely on imported raw materials and components may benefit from lower import costs, improving their competitiveness and profitability.
Foreign Investment: A strong or strengthening Iranian rial can attract foreign investment into the country. Foreign investors may find it more favorable to invest in Iran when the local currency is strong, as it reduces the risk of currency depreciation.
Negative Impacts of Strong or Stronger Iranian Rial:
Export Competitiveness: A strong Iranian rial can make Iranian exports relatively more expensive in international markets, potentially reducing their competitiveness and limiting export growth.
Trade Balance: A strong rial can increase the cost of imports, potentially widening the trade deficit if import volumes remain high.
Tourism: A strong rial can make Iran relatively more expensive for international tourists, potentially affecting the tourism industry and reducing foreign exchange earnings.
Manufacturing and Job Losses: A strong rial can negatively impact export-oriented industries, leading to reduced production and potential job losses in those sectors.
It's important to note that the impact of currency strength or weakness on a country's economy is complex and interconnected. It depends on a range of factors, including the country's economic structure, trade dynamics, fiscal policies, inflation rates, and global market conditions.
Note
Here is an analysis of the positive and negative impacts of a weak and strong Japanese yen on various countries and regions:Positive Impacts of Weak Japanese Yen:
Japanese Exports: A weak yen can boost Japanese exports by making them more price competitive in international markets. It makes Japanese goods relatively cheaper for foreign buyers, potentially increasing demand and stimulating export-oriented industries.
Tourism: A weak yen can attract more international tourists to Japan, as their foreign currencies can have greater purchasing power in the country. This can benefit the tourism industry and generate foreign exchange earnings.
Overseas Investments: A weak yen can encourage Japanese businesses and investors to seek opportunities abroad. It makes overseas investments relatively cheaper in terms of yen, potentially promoting outward foreign direct investment (FDI) and diversifying business activities.
Negative Impacts of Weak Japanese Yen:
Imported Inflation: A weak yen increases the cost of importing goods and raw materials, potentially leading to higher inflation. This can impact the purchasing power of Japanese consumers and erode their standard of living.
Energy Imports: Japan is heavily reliant on energy imports, particularly oil and natural gas. A weak yen increases the cost of energy imports, which can have adverse effects on energy-intensive industries and contribute to higher production costs.
Consumer Electronics: Japan is known for its consumer electronics industry. A weak yen can increase the cost of importing electronic components and materials, potentially affecting the competitiveness and profitability of Japanese electronic manufacturers.
Positive Impacts of Strong Japanese Yen:
Imported Goods: A strong yen makes imported goods relatively cheaper, benefiting Japanese consumers and potentially increasing their purchasing power.
Energy Costs: A strong yen reduces the cost of energy imports, which can benefit energy-intensive industries and help control production costs.
Travel and Education Abroad: A strong yen can make international travel and education abroad more affordable for Japanese citizens, potentially boosting outbound tourism and educational opportunities.
Negative Impacts of Strong Japanese Yen:
Japanese Exports: A strong yen can make Japanese exports relatively more expensive in international markets, potentially reducing their competitiveness and impacting export-oriented industries.
Tourism: A strong yen can make Japan relatively more expensive for international tourists, potentially affecting the tourism industry and reducing foreign exchange earnings.
Inflation and Deflation Concerns: A strong yen can exacerbate deflationary pressures in the Japanese economy, as it makes imported goods cheaper and can lead to lower domestic prices. This can hinder economic growth and pose challenges for policymakers.
It's important to note that the impact of currency strength or weakness on a country's economy can vary depending on various factors, including the country's economic structure, trade dynamics, fiscal policies, and global market conditions. The effects on specific countries or regions can also depend on their trade relationships, exchange rate policies, and economic interdependencies with Japan.
Note
Dollar Index Hits 14-month LowDXY decreased to a 14-month low of 100.61
Wall Street Rallies after Softer Inflation
US stocks surged on Wednesday after both headline and core inflation fell more than expected in June, reinforcing the view the Federal Reserve may stop the tightening campaign sooner than expected. The Dow Jones gained around 250 points to 34548, the highest level since November last year, with 3M and Goldman Sachs up nearly 2% and among the top performers. The S&P 500 added 0.9% 4477, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and real estate sectors. The Nasdaq was up about 1.2% to 13906, also the highest since April last year. Traders are currently pricing in a 92% chance for a 25bps increase in the fed funds rate this month, while the odds for another quarter-point hike in September fell to 13% from 20% before the CPI release and in November eased to 26% from 34%.
Brazil Business Morale Rises to 8-Month High
The Industrial Entrepreneur Confidence Index (ICEI) in Brazil rose by 0.7 points from the previous month to an eight-month high of 51.1 in July of 2023. This marks the second consecutive month in which the industry has shown confidence, attributed primarily to a more positive evaluation of the current economic conditions (+1.3 points to 45.5). Also, the indicator of future expectations increased (+0.4 points to 53.9), indicating optimism for the next six months.
FTSE MIB Close Rise to 15-Year High
The FTSE MIB index closed 1.8% higher at 28,573 on Wednesday, outperforming other benchmark European indices amid sharp gains for its heavyweight financial sector as markets digested the soft US inflation print. American consumer prices rose by 3% annually in June, below estimates of 3.1%, benefitting from a slowdown in core consumer prices. The development lifted equities amid hopes that the Fed will be able to ease its hawkish pressure. Banks were among the sharpest gainers as BTP yields fell by 15bps, aiding their balance sheet with Banca MPS and Banco BPM both adding more than 2%. In the meantime, STMicroelectronics shares surged 4.8% amid recommendation updates from Jeffries and Citigroup.
Note
US Stocks Pop on Cooling InflationAll major US stocks indexes were trading in the green on Wednesday afternoon as June CPI data came cooler-than-expected, raising hopes that Fed officials might rethink their stance on more rate hikes. The Dow Jones was up more than 100 points after reaching the highest level since November earlier in the session, as Salesforce, Goldman Sachs and Home Depot outperformed, adding nearly 2% each. The S&P 500 gained 0.8%, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and basic materials sectors. The Nasdaq was up about 1.2%, also the highest since April last year. Bank stocks advanced firmly, with Citigroup and Goldman Sachs adding 2.9% and 2.5%, respectively. Also, regional banks such as Comerica(5.1%) and Zions Bancorporation (4.9%). In the news, Domino's Pizza surged over 11% after revealing its deal with Uber Eats.
All major US stocks indexes were trading in the green on Wednesday afternoon as June CPI data came cooler-than-expected, raising hopes that Fed officials might rethink their stance on more rate hikes. The Dow Jones was up more than 100 points after reaching the highest level since November earlier in the session, as Salesforce, Goldman Sachs and Home Depot outperformed, adding nearly 2% each. The S&P 500 gained 0.8%, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and basic materials sectors. The Nasdaq was up about 1.2%, also the highest since April last year. Bank stocks advanced firmly, with Citigroup and Goldman Sachs adding 2.9% and 2.5%, respectively. Also, regional banks such as Comerica(5.1%) and Zions Bancorporation (4.9%). In the news, Domino's Pizza surged over 11% after revealing its deal with Uber Eats.Japanese Yen attempting fifth consecutive daily advance (first time since December)
USD/JPY plunge now approaching major support confluence- risk for price inflection
Resistance 140.10s, 140.93, 142.10/50 (key)- support 137.36/91, 136.15, 134.04
The Japanese Yen has continued to coil just below uptrend resistance with major event risk on tap into the close of the week. The focus is on a breakout of the monthly opening-range for guidance. These are the updated targets and invalidation levels that matter on the USD/JPY short-term technical charts.
Initial resistance now eyed at the 75% parallel (blue slope currently ~140.10s) backed by the objective May high at 140.93. Ultimately, a breach / close above the weekly open / 61.8% retracement of the 2022 decline at 142.10/50 would be needed to mark resumption of the broader USD/JPY uptrend.
Bottom line: The USD/JPY plunge us approaching the first major technical support hurdle just below the 138-handle. From at trading standpoint, look to reduce portions of short-exposure / lower protective stops on a stretch towards this key support zone – rallies should be limited to the weekly open IF price is heading lower on this stretch. I’ll publish an updated Japanese Yen Weekly Forecast once we get further clarity on the longer-term USD/JPY technical trade levels.
Note
Trade is open
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.