Forex market: Yen’s Black Friday; CHF/JPY hits 42-year highs
08:30, 17 June 2022
It's another Black Friday for the Japanese yen (JPY), plummeting against all major currencies following the Bank of Japan's decision to keep rates steady at -0.1 percent, thereby remaining the only major central bank to keep ultra-expansionary monetary policies in place.
BOJ's Governor Haruhiko Kuroda continues to signal an extremely dovish stance, stating that the Bank is ready to take "additional easing measures without hesitation if needed" and to keep the 10-year Japanese government bond yield target at around 0%, despite the fact that April’s inflation is running above the BoJ’s target for the first time in decades.
After losing 17% versus the dollar this year, the JPY remains under pressure in the forex market.
The Swiss franc-Japanese yen (CHF/JPY) pair is the best performer pair of the day, rising by 1.7%, echoing yesterday's performance, which was backed by the Swiss National Bank's (SNB) unexpected rate hike (by 0.5 percentage points). The franc rallied over ¥139, reaching its highest level since June 1982.
The dollar (USD/JPY) climbed over ¥134.5 levels (+1.7%), while the euro (EUR/JPY) regained ¥141 (+1.3%).
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Chart of the day: Swiss franc reaches 42-year high against the Japanese yen (CHF/JPY)
BoE's fifth consecutive hike: pound rebounds
The Bank of England raised interest rates for the fifth time in a row yesterday, lifting the Bank rate to 1.25%, despite three dissenting members out of nine.
Overall, the BoE's statement was supportive for the pound, as it underscores upside risks to inflation and the need to continue expeditiously on the path of rate rises, which might possibly lead to broader movements if the inflationary outlook worsens further.
The pound (GBP/USD) first retreated against the dollar from 1.21 to 1.20, but then soon climbed to the 1.24 range following BoE assurances of more hikes and disappointing US macro data in the afternoon.
Today, the pound opened marginally lower (-0.1%) to 1.232, as market risk sentiment remains still depressed due to global growth fears and yesterday's severe selloff on global equity markets.
Forex market today – 17 June 2022
The US dollar index (DXY) is 0.4% higher to 104.3 levels in London morning trading, after weakening as much as 1% in the previous session. Yesterday's US macro data – Philadelphia Fed manufacturing index, initial jobless claims and housing market – were lower than expected, bolstering the Fed's forecasts of an economic slowdown. The yield on the 10-year US Treasury has dropped from 3.5 percent to 3.2 percent.
The euro (EUR/USD) had a positive session yesterday, rising above 1.05 levels, boosted by lessened tensions in the peripheral bond market following the ECB's disclosure of an anti-fragmentation tool, as well as poor US data. Today, euro opened 0.2% lower to 1.052 dollars.
The sterling (GBP/USD) traded at 1.232 (-0.2%), holding below the psychological barrier level of 1.24, which sparked some selling activity yesterday.
The yen absorbs the BoJ's dovish punch, as USD/JPY gains 1.7% to 134.5.
The Swiss franc remains the best-performing major currency of the day, alongwith the greenback. USD/CHF was flat on the day, but the franc gained against all other majors. The CHF rally is supported by the SNB's stance shift, which hiked rates by half a percentage point when the market expected no change, as well as deteriorating global risk sentiment, which favours demand flows to safe haven assets, like the franc.
Risk-sensitive majors, such as the Australian dollar (AUD/USD) and the New Zealand dollar (NZD/USD), weakened today amid renewed concerns about global growth.
Oil-linked majors, such as the Canadian dollar (USD/CAD) and the Norwegian krone (USD/NOK), were broadly flat, supported by WTI crude oil rebounding to $118 per barrel.
Emerging currencies are relatively quiet, after yesterday's major selloff. The Mexican peso (USD/MXN) gained 0.4% against USD, while the South African rand (USD/ZAR) surged 0.7%.
Forex pairs: Top risers and fallers today – 17 June 2022
Forex market performance – 17 June 2022
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