Intervention alert as USD/JPY approaches 160.00 – United States

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

All eyes on Japan as USD/JPY approaches key level

Forex markets watched Japanese markets closely overnight as USD/JPY fell back towards 160.00 yesterday – the level at which Japanese authorities intervened to push the pair lower in April.

The USD/JPY pair peaked at 159.92 before reversing lower, leading to weakening of the US dollar in most other markets.

The USD index lost 0.3 percent.

Elsewhere in markets, the Aussie moved back toward its five-month high, with AUD/USD up 0.3%.

The NZD/USD rose slightly from its monthly low, but only by 0.1%.

Both EUR/USD and GBP/USD recovered from recent lows.

In Asia, the USD/SGD rate has clearly lost its important resistance at 1.3550. The USD/CNH rate also weakened, losing its seven-month high.

USD can be supported by good data

Last week’s PMI numbers were mostly disappointing. Australia, Japan and Europe fell short of expectations, but the US again performed better and helped the USD rise.

In June, we expect the Conference Board consumer confidence index to rise one point to 103.0.

Despite the unexpected decline in the University of Michigan’s (UMich) first consumer confidence index in early June, underlying economic data appear to support optimism.

Inflation and employment data for June were both encouraging, gas prices fell earlier in the month and the stock market performed better than expected.

We believe that the strength of the US dollar could be sustained in the medium term by higher US interest rate policy over the longer term.

Ringgit benefits from government-supported export conversions

The Malaysian ringgit has been one of the stronger currencies in Asia, outperforming regional giants such as the Japanese yen, South Korean won and Indian rupee. However, the continued strength of the US dollar has caused most Asian currencies to lose ground this year.

One reason for the better performance of MYR foreign exchange trading is that BNM continues to work with state-owned enterprises to convert their export earnings.

The inflation index due at 12:00 noon SGT on Tuesday is expected to increase slightly from 1.8 percent in April to 1.9 percent in May compared to the same period last year, partly due to base effects from telecommunications service prices last year.

Inflation in utilities and some service components, including those in food and accommodation, certainly remained high.

While most Asian currency markets are currently still weaker, USD/MYR still has a chance to rise back to multi-decade highs between 4.75 and 4.80.

Aussie back near record highs

Table: 7-day currency trends and trading ranges

Major global risk events

Calendar: 24 – 29 June

All times AEST

*Published exchange rates are provided by Convera’s Market Insights team for research purposes only. Rates are from a unique source and may not match live exchange rates quoted on other websites. They are not an indication of actual buy/sell rates or a financial offer.

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