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USD Plummets Amid Speculated Japanese FX Intervention, Fed Headlines

  • The Dollar index made a new high for October at 113.94 in early trade on Friday and the initial strength was underpinned by USDJPY surging to a 32-year high of 151.95. However, some relatively dovish Fed speak, followed by speculated Japanese intervention in the currency markets sparked a steep greenback selloff, with the USD index plummeting around two percent from the day’s highs.
  • WSJ reported that the Federal Reserve’s November meeting could serve as a critical staging ground for future plans, including whether and how to step down to a 50bp increment in December.
    • The commentary prompted a sharp rally for the front end of the Tsys curve, in turn weighing on the greenback.
  • While USDJPY had only initially dropped between 60-90 pips, the ensuing price action was extremely aggressive, prompting significant moves across the board. Over the course of around an hour, USDJPY traded from 151.50 to an intra-day low of 146.23. While there has been no official confirmation, with MOF officials declining to comment, Nikkei reports did refer to Japanese intervention in the FX market.
  • The volatility reverberated across FX markets as a whole, with the USD index briefly slipping back below 112, a fresh weekly low after not long before trading at the week’s best levels.
  • Approaching the close, USDJPY resides down 1.15% after bouncing back to 148.50 and is matched by a similar appreciation for AUDUSD, reflecting the strong recovery for major equity indices.
  • Flash Manufacturing and Services PMIs will cross Monday. On the central bank slate, policy decisions are due from Canada, the ECB and the Bank of Japan next week.

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