Dollar Slumps, Yen Gains — A Stealthy Intervention Signal?
The US dollar fell sharply on Monday (January 26), while the Japanese yen surged as markets detected the scent of coordinated US-Japan intervention. At 4:10 AM ET (9:10 AM GMT), the Dollar Index fell 0.4% to 96.975, its lowest level since mid-September.
The biggest pressure on the dollar came from the USD/JPY pair. On Friday, the pair had already fallen 1.7% and continued to weaken at the start of the week. Markets suspected Japanese (and possibly US) authorities were stepping in to support the previously depressed yen.
Speculation intensified after news emerged that the New York Fed would conduct a "rate check" on USD/JPY around midday on Friday—a move often read as an early signal before intervention. ING analysts noted that the suspected USD/JPY selloff came at a bad time for the dollar, as sentiment toward US assets was also fragile.
However, ING believes this move is not purely fundamental, and this week's FOMC meeting could actually be slightly supportive of the dollar. The Fed will conclude its two-day policy meeting on Wednesday, and the market is widely expecting interest rates to be on hold. The main focus will be on Jerome Powell's tone regarding the timing of the rate cuts; ING even predicts potential cuts in March and June, although there is a risk of a delay of about three months.
In Europe, outflows from the dollar have boosted other currencies. EUR/USD rose 0.2% to 1.1853, breaking through the major resistance area of 1.1800/1810. However, German data has been somewhat slow: the Ifo business climate index remained at 87.6 in January (expected 88.3). GBP/USD edged up 0.1% to 1.3663, while USD/CHF fell 0.4% to 0.7773—indicating that the Swiss franc is also being sought as a safe haven.
In Asia, the USD/JPY pair fell another 1.1% to 154.02, the yen's strongest level since late November, triggering short covering after many positions had previously been "targeting yen weakness." The market is becoming increasingly sensitive as US-Japanese officials are reportedly in intense communication regarding FX.
Meanwhile, USD/CNY fell 0.1% to 6.9571, AUD/USD rose 0.2% to 0.6911, and NZD/USD rose 0.2% to 0.5960.
Source: Newsmaker.id
