- CHina’s rate cut and liquidity infusion have failed to put a bid under the risky assets.
- The Anti-risk Yen remains better bid and is keeping USD/JPY on the defensive.
- Equity markets may not be out of the woods yet, according to Goldman Sachs.
USD/JPY continues to trade in the red as the rate cut by China has failed to bring cheer to the equity markets.
The currency pair is currently trading near 107.25, representing a 0.60% loss on the day, having hit a session low of 107.12 a few minutes before press time.
The People’s Bank of China cut the seven-day reverse repo rate to 2.2% from 2.4% and injected $7 billion or 50 billion yuan into the banking system.
The move, however, has failed to put a bid under the risky assets. The futures on the S&P 500 is keeping losses and is currently reporting a 1% decline on the day. Stocks in Asia are also feeling the pull of gravity with Japan’s Nikkei index shedding 3.4%. As a result, the anti-risk yen remains better bid.
The pair may decline further on fears the Japanese government may declare a state of emergency due to the worsening situation on the coronavirus-front. Japan’s Cabinet Secretary Suga was out on the wires a few minutes ago informing markets about the possibility of Japan declaring an emergency.
Further, analysts at Goldman Sachs are of the opinion that the economic fallout in the West is just beginning and the equity markets may see renewed selling. Investors, therefore, could continue to build longs in traditional safe havens like JPY.