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Helicopter Money Predictions Are Still Flying High in Japan

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Yen surges to 18 months high against the dollar

Speculation of helicopter money refuses to die in Japan, despite repeated denials by Bank of Japan Governor Haruhiko Kuroda.

From Japan-based economists to global investors including Templeton Emerging Markets Group Executive Chairman Mark Mobius, there’s a reluctance to rule out the controversial policy coming as soon as next month amid the monetary authority’s struggles to stoke growth and inflation. Kuroda has said at least four times since April that helicopter money is not under consideration, and is prohibited by current law. He repeated over the weekend that there remains “ample space for additional easing” under the existing policy framework.

“It’s unthinkable that nothing would happen in September,” said Daiju Aoki, an economist at UBS Group AG in Tokyo. “The most likely measure would be pseudo-helicopter money where the BOJ will commit to holding Japanese government bonds for a long time.”

UBS is in good company. Mobius also said last week that direct financing of government spending could be imminent, while Aberdeen Asset Management said Japan is the most likely location for such an initiative. Bank of America Merrill Lynch’s head of global rates and currencies research David Woo said on Bloomberg Television this month that helicopter money is probably the only option left on the table.

The introduction of a negative deposit rate this year sent benchmark government bond yields tumbling to a record low of minus 0.3 percent last month. They have since retraced more than two thirds of that — and the policy failed to weaken the yen for more than a day. The 10-year sovereign yield was at minus 0.075 percent on Wednesday in Tokyo.

Talk of the BOJ needing to change tack has grown since Kuroda announced a comprehensive review of current measures for the Sept. 20-21 policy meeting, with a gauge of inflation expectations less than a sixth of the way to the 2 percent target. While Kuroda’s most recent comments underline his stance that the review won’t mean any reduction in stimulus, doubts have grown about the policy’s sustainability.

Helicopter money, a kind of last resort in unconventional monetary policy, comes in several forms. The most simple is printing money and giving it to the public in the hope they’ll spend it: equivalent to dumping cash from choppers in the air. Others include putting money directly into the hands of companies or financing state spending by having the BOJ buy bonds straight from the government.

Speculation about the policy peaked in July after a visit to Tokyo by former Federal Reserve Chairman Ben S. Bernanke during which he met separately with Kuroda and Prime Minister Shinzo Abe. He floated the idea of selling perpetual bonds directly to the central bank during discussions in Washington with one of Abe’s key advisers in April.

While Kuroda reiterated last month at a Group-of-20 meeting in Chengdu, China that helicopter money is not an option, he has changed course without warning before. He announced a negative interest rate policy in January after ruling it out the previous month.

“Given Abe’s popularity, he’s in a pretty good position to change the law if he wanted to,” Michael Moen, a Sydney-based investment manager at Aberdeen Asset Management, said in a phone interview last week. “If you were going to pick a central bank around the world and a government that was going to use helicopter money, I think Japan is clearly at the top of that list.”

While Moen doesn’t expect to hear the whirl of chopper blades anytime soon, Templeton’s Mobius suggests it could come next month.

BOJ Ammunition

“They’re really beginning to think what ammunition they have,” he said during a visit to Tokyo last week. “The first reaction is to say, OK, let’s go for helicopter money, let’s get money directly into the hands of consumers.”

Quantitative easing is also showing signs of approaching its limit as banks run out of securities to sell.

“It’s an extremely dangerous game the market is playing, but speculation of helicopter money will never go away completely,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “Japan needs to think now about how it would use the policy, before the time comes when it might have to deploy it.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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US Dollar

Dollar Falls as Risk Appetite Improves, Sterling Dips on BoE

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US Dollar - Investorsking.com

The dollar dropped to its lowest point in three days on Thursday as global market risk appetite improved, while sterling zig-zagged after the Bank of England slowed the pace of its bond-buying, but left interest rates unchanged.

Fewer Americans filed new claims for unemployment benefits last week, data showed, as COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

While the U.S. economy has been gaining steam, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

Those statements reinforced “the lower-for-longer mentality with regards to interest rates,” making the greenback less appealing, said Neil Jones, head of FX sales at Mizuho.

The safehaven U.S. dollar was last down 0.31% at 91.977 against a basket of peer currencies.

“What we’ve seen early in New York is a little bit of back-and-forth gyrations, just because of the Bank of England meeting,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They kept their QE target in place but they said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” Bregar said.

The pound was last down 0.08% against the weaker dollar at $1.3900 .

The euro was up 0.47% versus the dollar at $1.2061 , and up 0.65% against the pound, at 86.88 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

The Aussie was up 0.1% versus the U.S. dollar at 0.77515 at 1028 GMT, having hit as low of 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

“The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event,” wrote ING strategists in a note to clients.

The Canadian dollar hit a three-and-a-half year high, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin declined 0.2% to $57,392.75.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

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