BUZZ-COMMENT-US recap: Suspected USD/JPY intervention softens dollar pre-Fed, payrolls

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- The biggest FX major mover on Monday was USD/JPY's rise to 160.25 by 1990's 160.35 highs, then dive to 154.40 on suspected BoJ intervention, and another setback from 156.88, with the dollar lower versus the euro and most other currencies.

As the smoke settles from the fireworks, investors are now preparing for the end of the Fed's two-day meeting on Wednesday and jobs data on Friday.

USD/JPY's recovery from just below last week's 154.50 low to 156.88 was followed by a quick dip to 155.05 after the daily tenkan couldn't be cleared.

Though Japan's top currency diplomat, Masato Kanda, wouldn't confirm what was widely suspected to be intervention, he said current developments in the exchange-rate market were "speculative, rapid and abnormal," and that they could not be overlooked.

He went on to say they will continue to take appropriate action against excessive forex moves. Coming on a holiday in Japan, Kanda said they are ready to respond 24-hours a day, 365 days a year.

After the BoJ last week failed to indicate any urgency in further unwinding its easy policies, including QE, the focus was on potential intervention to steady the yen.

Now the issue is whether 1990's high will be defended again and whether the Fed's move away from rapid rate cut signaling due to mostly above-forecast inflation and strong labor data will persist after Wednesday's ADP, JOLTS and FOMC meeting and Friday's April employment report. If so, downside in USD/JPY will largely be limited to overbought conditions being corrected in the face of intervention risk.

EUR/USD rose 0.28%, finding support near the 10-day moving average for a fourth day. Euro zone economic sentiment weakened further, while German inflation data were mixed.

A June ECB rate cut is being priced by swaps as a 73% probability, with 67bp of easing by year-end. The market sees a 58% probability of the first Fed cut coming in September, with a total of just 36bp priced in by year-end.

Sterling rose 0.53%, continuing its recovery from the March-April slide, with an assist from EUR/GBP's 0.3% drop toward this year's series of slightly higher monthly lows, April's at 0.8521 now nearby after last week's 0.8643 April peaks.

Aussie and kiwi rose 0.54% and 0.74%, respectively, taking a cue from a weaker USD/CNH. The RBA is the only major central bank other than the BoJ seen with scope to raise, rather than reduce, rates this year.

For more click on FXBUZ


(Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

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