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Japanese Yen Remains On Backfoot, Substantial Moves In EM FX

FOREX
  • Mixed price action across G10 on Thursday saw the USD index tilt marginally into positive territory, rising 0.1% as we approach the APAC crossover. This was dominated by a strong 0.75% move higher in USDJPY, on the back of some dovish leaning rhetoric from Bank of Japan’s Uchida.
  • The policymaker acknowledged the likely need for tighter policy in Japan in the near-term, but played down the prospect of a more protracted tightening cycle after a first theoretical rate hike. He stated that it is hard to see Japan requiring a sharp hiking pace after rate lift-off, helping boost USDJPY back to the best levels of 2024 above 148.89.
  • JPY weakness then persisted across the US session with the slightly better-than-expected jobless claims data providing additional impetus for USDJPY above 149.00. The pair rose to a high of 149.48 and will now focus on 149.75, the Nov 22 high.
  • The higher US yields also weighed on the likes of AUD and NZD, however, the Euro remained more resilient throughout Thursday’s session. A bearish theme in AUDUSD remains intact and any short-term gains continue to be considered corrective. The latest break to fresh cycle lows confirmed a resumption of the downtrend and signals scope for weakness towards 0.6453, the Nov 17 low and 0.6412, a Fibonacci retracement level.
  • In emerging markets, divergence in communication between the central banks of the CE3 economies has led to some interesting moves across CE3 FX.
  • A dovish CNB vote split and relatively hawkish NBP press conference by Governor Glapinski has led to a 1.6% surge in PLNCZK, which pierced the 5.8000 handle for the first time since March 2021, and is currently at its highest since December 2020.
  • Additionally, USDCLP brushed off a higher inflation release and has extended its powerful move higher, rising 1.2% on the session.
  • US inflation revisions in focus Friday. BLS will update seasonal factors affecting CPI inflation through 2019-23 on Friday, Feb 9 “from 0830ET”.
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