Yen tumbles as FX market adjusts to central bank rate decisions

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  • The BOJ takes advantage of the tightening wave, the yen loses more than 2%
  • Swiss franc hits two-month high against euro
  • The Aussie hurt by the drop in global sentiment

NEW YORK, June 17 (Reuters) – The Japanese yen tumbled against the dollar on Friday after the Bank of Japan resisted a wave of tightening and stuck to its ultra-dovish stance, adding to growing volatility in currency markets. forex hit by a series of rate hikes this week.

Currency markets have been rocked by one of the biggest rounds of monetary policy tightening in decades, including the Federal Reserve’s midweek three-quarters of a percentage point rate hike, the most important since 1995, and the surprise of the Swiss National Bank. decision to raise rates by 50 basis points.

Japan’s central bank swam against the tide on Friday, keeping its policy settings unchanged and pledging to defend its 0.25% bond yield cap with unlimited buying. Read more

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“Everyone expected the BOJ to do something. They didn’t,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

The yen, which hit a 24-year low of 135.6 to the dollar on Wednesday, plunged in reaction to the BOJ’s decision. The Japanese currency was down 2.09% against the greenback at 134.885 yen, and was down 1.62% against the euro.

The 135 level has been a technical resistance point for the yen and breaking it could force many shorts against the dollar-yen currency pair to have to hedge their bets, potentially pushing the pair to 137 or 140, Schlossberg said.

“If we really start to climb higher from this point, I think it will definitely force some of those early shorts out of business,” he said.

24-year lows for the yen

The dollar rose from a one-week low against its major peers, rebounding from a two-day decline after the Fed’s midweek rate hike of 75 basis points, a move that was anticipated. by the markets as the Fed attempted to rein in stubbornly high inflation.

The dollar index, which measures the currency against a basket of six rivals, rose 0.732% to 104.64, putting it on track for a weekly rise of around 0.4% ahead of a long week. -end in the United States.

“Today we are seeing a rebalancing of the market,” said Simon Harvey, head of currency analysis at Monex Europe. “Markets are still adjusting to central bank meetings throughout the week.”

The euro was last down 0.53% at $1.0496 against the dollar.

The Swiss National Bank’s surprise decision to hike rates by half a percentage point continued to reverberate through markets, with the franc hitting 1.0098 against the euro, its strongest since April 13, as that investors are betting that the SNB will not try to stop the strengthening of the currency as it has in the past.

Shedding earlier gains against the Swiss currency, the dollar lost 0.31% to 0.9696 francs, after falling the most in seven years against the Swissy in the previous session. Read more

“The surprise rate hike in Switzerland, along with the announcement by the European Central Bank that it is working on a tool to prevent the fragmentation of European bond markets, will help limit USD strength around current levels,” said UBS Global Wealth Management strategists. Chief Investment Office said in a research note.

The pound fell 0.99% to $1.2229, giving back most of its gains since the Bank of England decided to raise rates again, albeit less than many in the market had expected , as well as a warmongering signal regarding future political action. Read more

Currency markets are also dealing with a massive drop in risk sentiment that has rattled equity markets.

The Australian dollar, which is very sensitive to the general mood of global investments, fell 1.53% to just under $0.6938 after the fall in Asian stock markets, while Wall Street rose slightly after a strong sell-off on Thursday.

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Reporting by John McCrank in New York and Tommy Wilkes in London; Editing by Raissa Kasolowsky, Edmund Blair, Toby Chopra and Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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