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American stocks typically react to the Federal Reserve’s interest rate decisions because they influence borrowing costs, corporate profits, and consumer spending. A reduction in interest rates, like the 50 basis points cut you mentioned, tends to make borrowing cheaper for businesses and consumers, which can stimulate economic activity and boost stock prices in the U.S.
Regarding the connection between the Japanese yen, U.S. dollar, and Japanese stocks:
1. Weaker Yen, Stronger Japanese Exports:
A decline in the value of the yen against the U.S. dollar makes Japanese goods cheaper and more competitive in foreign markets, especially in the U.S. As a result, Japan's export-heavy industries (like electronics, automobiles, and machinery) benefit. When these industries thrive, their stock prices tend to rise, lifting the broader Japanese stock market. 2 replies
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