LiveWire

The Japanese yen is in free fall, with the pair USDJPY hitting 136.30 its lowest point since late 1998! The weakness against other major currencies comes as the Bank of Japan has decided to stick to its loose policy contrary to its global counterparts, which are raising interest rates to fight inflation. The spike in USDJPY followed today's Japan's Prime Minister's intervention where he voiced his support for maintaining the current course of the monetary policy by the BoJ.

The yield premiums that US inflation-adjusted 10-year notes offer over those of other economies that make up the Dollar Index has been narrowing since the start of May as real yields in the eurozone are also on the rise. The ECB is seen hiking rates next month along with central banks from the UK and lately Switzerland. The dollar gauge (UUP) is likely to continue to trade in a range until further inflation data comes out. Bears will be looking at 104.5-105 to sell in the strength, while bulls will likely continue to buy the dip around the 102 level. It will be useful to keep in mind that as long as the growth outlook isn't improving, bulls might have the upper hand... 

The USDCHF dropped as much as 1.8% following the Swiss National Bank's interest rate decision. The SNB surprised markets by announcing a 50 basis point rate hike, the first time since 2007 in an attempt to counter the risk of higher for longer inflation numbers. The Central bank said further increases are on the table should inflation remain high. The sentiment remains in favour of a stronger Swiss franc.

Japan’s Ministry of Finance, the Bank of Japan and the Financial Services Agency met this morning 4 pm local time to discuss the recent rapid decline in the yen. This is the first time a statement has been issued following a meeting of the parties, highlighting its importance and showing officials' concerns. The party said they will act “appropriately” on forex if needed while communicating closely with other nations.  Following the statement, the dollar-yen managed to pull back slightly, trading now near the 133.70 level. Key technical levels to watch for are 134.50 (resistance) and 132.50 (support). 

The Swiss franc is on course for its biggest two-day rally against the euro since 2015, fueled by speculation Switzerland’s central bank could raise rates to cool inflation.