FX UPDATE 29/04/2024

 The Japanese Yen soared as much as 5 Yen against the Dollar on Monday. The Dollar fell to 154.4 Yen in Asia trade, and reached an intraday high of 160.245, the highest since 1990. At the time of writing the greenback fell to 155.50 Yen, a fall of 1.7%. For weeks, traders have been watching closely for any moves from Tokyo to support a currency that has dropped 11% against the Dollar this year. The Yen's decline to its lowest levels in 34 years has happened despite Japan's recent move away from negative interest rates, as traders anticipate that Japanese rates will stay low for the foreseeable future, Reuters reports. “The move has all the hallmarks of an actual BOJ (Bank of Japan) intervention and what better time to do it than on a Japanese public holiday, which means lower liquidity in USD/JPY and more Bang for the Bank of Japan's buck!,” stated Tony Sycamore, Sydney-based market analyst at IG.

Whereas Standard Chartered Bank’s Asia macro strategist, Nicholas Chia commented: “Today's move, if it represents intervention by the authorities, is unlikely to be a one-and-done move. We can likely expect more follow through from MOF if USD-JPY travels to 160 again. In a sense, the 160-level represents the pain threshold, or new line in the sand for the authorities.”

The Yen had moved almost 3.5 Yen between 158.445 and 154.97 on Friday as the Bank of Japan held policy settings unchanged and provided few clues on reducing its Japanese government bond (JGB) purchases. This move could potentially help stabilise the yen. 

Elsewhere, the Federal Reserve’s upcoming policy review on 1st May sees investors forecasting a delay in rate cuts by the US central bank after sticky US inflation readings. The Fed is predicted to hold the benchmark interest rate steady at 5.25%-to-5.5% at this week’s meeting. According to the CME's FedWatch tool, investors now forecast just one rate cut this year, likely in November. This has led US yields and the Dollar on an upward trajectory over the past weeks. “The bar is pretty high for a sustained hawkish surprise, which would in turn lift yields,” stated Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank in Singapore.

The Dollar index, measuring the currency against major peers, declined 0.33% at the time of writing to 105.61, yet remained on track for a monthly gain of 1%.

The anticipation of delayed Federal Reserve cuts has led to the Dollar gaining against most currencies in recent weeks, while other major central banks like the European Central Bank and Bank of England are expected to make more substantial cuts this year.

Yet both Sterling and the Euro have rebounded slightly from five-month lows hit in the middle of the month. At the time of writing the Euro was trading at $1.0718, a 0.24% gain on the day, whilst the Pound rose 0.28% to $1.25280.