Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
All eyes on Japan as USD/JPY nears key level
FX markets were closely watching Japanese markets overnight as the USD/JPY pushed back toward 160.00 yesterday – the level that saw Japanese authorities intervene in April to drive the pair lower.
The USD/JPY pair topped-out at 159.92 before reversing lower – causing the US dollar to weaken in most other markets.
The USD index lost 0.3%.
In other markets, the Aussie traded back towards five-month highs, with AUD/USD up 0.3%.
The NZD/USD inched higher from one-month lows, up only 0.1%.
The EUR/USD and GBP/USD both rebounded from recent lows.
In Asia, the USD/SGD turned sharply from key resistance at 1.3550. The USD/CNH was also lower as it turned from seven-month highs.
USD can be supported by good data
Last week’s PMI numbers were mostly disappointing with Australia, Japan and Europe below expectations, but the US again outperformed, helping the USD higher.
In June, we anticipate that the Conference Board’s consumer confidence index will rise by one point to 103.0.
Despite the unexpected fall in the first University of Michigan (UMich) consumer confidence index in early June, underlying economic data seem to be supportive of optimism.
Inflation and employment data for June were both encouraging, gas prices fell in the early part of the month, and the stock market performed better than expected.
We feel that over the medium term, US’s higher-for-longer policy on interest rates might sustain USD strength.
Ringgit buoyed by government-linked export conversions
The Malaysian ringgit has been one of the stronger currencies in Asia – outperforming regional giants like the Japanese yen, South Korean won and Indian rupee. That said, the ongoing strength of the US dollar has seen most Asian FX lose ground this year.
One reason for FX’s superior performance in MYR is that BNM is still working with government-linked companies to convert their export earnings.
Tuesday’s inflation reading, due at 12.00pm SGT, is expected to increase somewhat from 1.8% in April to 1.9% in May y-o-y, partially as a result of base effects from telecom service pricing from the previous year.
Utility and some service component inflation, including that of dining establishments and lodging, most certainly stayed high.
For now, while most Asian FX markets remain weaker, there remains the opportunity for USD/MYR to head back towards the multi-decade highs between 4.75-4.80.
Aussie back near highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 – 29 June
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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