USD/JPY hits 40-year highs, but greenback lags in other markets
The Japanese yen tumbled overnight as USD/JPY moved to the highest level since Europe’s The Final Countdown topped the charts in December 1986.
The Japanese yen has weakened as speculation grows that Japanese Prime Minister Sanae Takaichi will push back on further Bank of Japan rate hikes.
USD/JPY has put markets on alert for potential intervention from the Japanese Ministry of Finance.
The US dollar was less impressive in other markets. The US dollar index has recently reversed from 14-month highs after a monster two-week rally that saw the USD index gain 2.5% since the incoming Federal Reserve chair Kevin Warsh’s first Fed decision on 17 June.
However, while the USD has gained on the back of some tougher talk from the Federal Reserve, the potential for a cooldown in inflation as oil prices drop means markets are not convinced the Fed will necessarily follow through on rate hikes. Year-end pricing for rate hikes from the Fed has dropped from 31bps last week to 26bps.
The British pound was the best performer overnight, with GBP/USD up 0.4%, as the pair rebounded from the major support zone around 1.3200. The Australian and Canadian dollars lagged.
Aussie lags as RBA signals faster cuts when growth slows
Reserve Bank of Australia Assistant Governor Chris Kent said the bank’s new crisis toolkit is about preparedness, not an immediate shift in policy.
The cash rate will stay the main lever. However, if it is already low, the board could act sooner and more forcefully if inflation drops below its 2–3% target.
That points to a greater willingness to move early in a downturn.
Measures such as asset purchases, yield targets, negative rates, and FX intervention remain backup options for extreme situations.
AUD/USD remains under pressure, trading over 5% below its 6 May high of 0.7278.
Near-term resistance sits around the 21-day EMA at 0.7007, with the 100-day EMA close by at 0.7025.
On the downside, 0.6850 stands out as the next key support.
Euro stronger as ECB forum opens
ECB President Lagarde opened the ECB’s annual conference in Sintra with a moderately hawkish tone. She indicated that the June decision to hike rates was “justified under every scenario considered”, pushing back against what many had labelled an “insurance hike” aimed at pre-emptively guarding against rising inflation risks.
That said, there was little forward-looking guidance for investors to cling to, as she emphasised a meeting-by-meeting approach amid still-elevated uncertainty.
The ECB’s hawkish stance has become increasingly fragile as oil prices have retreated to near pre-war levels, particularly against the backdrop of a more assertive Federal Reserve.
EUR/USD is hovering around the 1.14 mark as investors await incoming data to provide clearer directional momentum. Key levels to watch are 1.1450, followed by 1.15. Until then, the move higher still feels like profit-taking after several days of intense selling pressure.
The euro was stronger in Asia. AUD/EUR and NZD/EUR both fell to two-month lows, while EUR/SGD rebounded from two-month lows.
Greenback eases
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 June – 3 July
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*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.
