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Forex news: yen and franc rise as stagflation spurs risk-aversion

10:04, 22 June 2022

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In this article:
  • AUD/USD

    0.69134 USD
    -0.00091 -0.130%
  • USD/CAD

    1.28692 USD
    -0.00046 -0.040%
  • USD/JPY

    136.092 USD
    0.646 +0.480%

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stagflation concept
Forex investors seek shelters from stagflation fears – Photo: Shutterstock

Traditional safe-haven currencies such as the Japanese yen (JPY) and the Swiss franc (CHF) continue to draw safe-haven flows in the European morning trading on Wednesday, as risk sentiment worsens due to rising stagflation worries. 

Expectations that high inflation will persist for a long time, demanding faster and more vigorous monetary tightening, even at the price of economic growth, have altered market sentiment toward riskier assets, reversing the brief positive trend saw earlier this week.

Following the recent surprise increase in US inflation last month, this morning was the turn of the UK, which announced a further jump in the annual inflation rate — at 9.1% from 9 percent in April – matching expectations but updating new highs since 1982.

Today, the market is anxiously awaiting Federal Reserve Chairman Jerome Powell's testimony before the Senate Banking Committee, where he is expected to reiterate the Fed's aim to aggressively raise interest rates in order to combat inflation. The US dollar (DXY) traded at 104.5 levels at 11:30 GMT, flat on the day. 

US dollar index (DXY) stable before Powell's testimony 

Chart of the day: Inflation continues to rise in the US and UK

a chart showing inflation rate UK and US inflation rate (year on year %chg) – Photo: Capital.com / Source: Tradingview

Forex market today – 22 June 2022

Euro-dollar exchange rate today (EUR to USD)

Euro (EUR): EUR/USD is hovering around the psychological level of 1.05, after hitting an intraday low of 1.0468 at the open. Yesterday, the euro failed to breach the resistance at 1.0540, despite ECB members Olli Rehn and Peter Kaimr opening the door for a half percentage point increase in September. European Central Bank Vice President Louis de Guindos warned this morning that eurozone inflation will continue above 8% in the next months. Jerome Powell's speech might add extra pressure on the pair if he offers hawkish comments.

Dollar-yen exchange rate today (USD to JPY)

Japanese yen (JPY): The yen fell 1.1% versus the dollar yesterday, with USD/JPY reaching 24-year highs of 136.7. The yen witnessed some buying activity overnight, with the USD/JPY pair sliding to 136.2 amid global growth fears. Overnight, policymakers in Japan remarked the importance of currency stability and that hasty moves are not desired.

Pound-dollar exchange rate today (GBP to USD)

British pound (GBP): Following yesterday's strong session, the pound saw a sell-off, triggered by increasing market risk sentiment and recession fears in the UK. GBP/USD fell to an intraday low of 1.216 before regaining ground over 1.22 at the time of writing. CPI inflation in May met analysts’ forecasts, coming in at +9.1 percent year on year and +0.7 percent month on month, but the core figure of +5.9 percent, down from +6.2 percent, fell short of expectations, indicating that overall inflation continues to be mainly driven by surges in energy and food items. Despite the Bank of England's hawkish comments during the last week, growth concerns keeps hurting the sterling in this phase. 

Dollar-franc exchange rate (USD to CHF)

Swiss franc (CHF): The franc is stable today and continues to trade in a very tight trend with the dollar, without any directionality. Breaking support at 0.963 might launch an assault towards the double-top’s neckline at 0.955.

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Australian dollar-US dollar exchange rate (AUD to USD)

Australian dollar (AUD): The Australian dollar (AUD) lost more than 1% versus the US dollar on the day and is attempting to find support at 0.689. Despite the latest RBA minutes showing additional rate rises will be needed, sellers dominated during the Asian session due to warnings about an economic slowdown, which is negative for growth-exposed currencies like the AUD. The falling prices of commodities have also dampened the enthusiasm of Aussie buyers. If risk sentiment does not improve, the year-to-date lows of 0.683 may be tested.

New Zealand dollar-US dollar exchange rate (NZD to USD)

New Zealand dollar (NZD): The Kiwi is the weakest performer among major currencies today, dropping 1.3% against the greenback. The NZD mirrored in footstep the price action of the neighboring Aussie dollar, with NZD/USD attempting to find support at 0.625, after failing to break out the 0.64 resistance yesterday. The year-to-date low (0.619) is only 0.8% from current prices, and bears may attack it if Powell delivers further hawkish remarks at his Senate hearing today.

US dollar-Canadian dollar exchange rate (USD to CAD)

Canadian dollar (CAD): The Loonie lost some ground against the dollar, dipping 0.5% today, dragged down by oil declines, with WTI losing 5% today and falling to $104 a barrel. The USD/CAD pair extended its gain to the 1.30 barrier, erasing yesterday's losses.

Major pairs: Top risers and fallers today – 22 June 2022

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKMajor currencies: Today’s top risers and fallers, 22 June 2022, 11:45 UTC – Photo: Capital.com

Forex market heatmap – 22 June 2022

A forex table showing the performance of US dollar and the euro against other currenciesForex market heatmap 22 June 2022, 11:45 UTC – Photo: Capital.com

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