JPY at the mercy of the storm; AUD rebounds

The Japanese yen is once again under pressure – Photo: Shutterstock

The Japanese yen (JPY) is once again in the midst of a selling fury, weakening against all major currencies in European morning trading on Tuesday, with the EUR/JPY pair breaking over 138 this morning, surpassing its 2018 highs.

Monetary policy divergences between the Bank of Japan and the rest of the major central banks continue to widen and become increasingly pressing for the yen. Last Thursday, the European Central Bank effectively declared the end of its third-quarter net asset purchases and left the door open for a subsequent rate hike.

Stock markets in Europe opened lower today as concerns over the war in Ukraine and the possibility of tighter monetary policy by major central banks weighed on investors’ sentiment. Ukrainian President Volodimir Zelenskiy claimed that Moscow has initiated a new campaign on the Donbas region and shelling has restarted.

The Australian dollar (AUD) is one of the best-performing G-10 currencies today, as minutes from the Reserve Bank of Australia (RBA) meeting indicated that the central bank is getting closer to raising interest rates for the first time since October 2010 , due to accelerating inflation and rising wages. This morning, the AUD/JPY pair reached June 2015 highs, having gained 50% from the trough in March 2020.

Chart of the day: EUR/JPY breaks 2018 highs

The US dollar index (DXY) began the new week on a positive note, aided by a jump in Treasury yields, with the 10-year note yielding 2.9%, the most since December 2018. For the first time since the onset of the Covid -19 outbreak, US 10-year real yields have also gone positive.

St Louis Federal Reserve (Fed) President James Bullard yesterday pushed for a 75-basis-point raise at the Fed’s May meeting. Meanwhile, the World Bank cut its 2022 global growth prediction by nearly a full percentage point, to 3.2% from 4.1%.

Today’s economic agenda is quiet, with the exception of the IMF World Economic Outlook, which will be published in the European afternoon with updated global macro projections.

AUD/JPY has gained 50% since March 2020

Chart showing the percentage change in AUD/JPY since Covid-19AUD/JPY performance since 19 March 2020 – Photo: Capital.com / Source: Tradingview

Forex markets today – April 19, 2022

  • In London’s morning trade, the US Dollar Index (DXY) held steady at 100.70 levels.
  • The euro (EUR) hit $1.08, gaining 0.2% on the day, paring yesterday’s losses. The British pound (GBP) edged to $1.303, up nearly 0.2% after sliding 0.4% yesterday.
  • Among safe-haven currencies, the Japanese yen (JPY) lost more than 1% on the day against the USD, amid higher US Treasury yields. The Swiss franc (CHF) was 0.1% higher versus the dollar.
  • Oil-linked currencies were positive as crude prices hovered around 110 for Brent. The Canadian dollar (CAD) and Norwegian krone (NOK) gained 0.2% and 0.5% respectively against the US dollar (USD).
  • The commodity-linked Australian dollar (AUD) was 0.4% higher as RBA’s minutes signaled upcoming rate hikes. The risk-sensitive New Zealand dollar (NZD) remained subdued as market sentiment weakened in Asia.
  • Among Central Eastern European (CEE) currencies, the Polish zloty (PLN) is again under pressure, slipping 0.4% versus the euro. The Hungarian forint (HUF) and the Czech koruna (CZK) both held steady.
  • The Russian ruble (RUB) fell 1% on the day. Ursula von der Leyen, head of the European Commission, said over the weekend that the EU could soon impose its sixth set of sanctions on Russia’s banking and energy sectors. Central Bank of Russia (CBR) Governor Elvira Nabiullina said on Monday that the Russian economy “will go through a structural transformation”. Meanwhile, the CBR relaxed some capital control measures.
  • Sentiment in emerging market currencies took a hit. Both the Korean won (KRW) and the Chinese yuan (CNH) fell by 0.3%, amid growth concerns. The South African rand (ZAR) tumbled by 1% after President Cyril Ramaphosa proclaimed a national state of disaster on Monday in response to the catastrophic floods on South Africa’s east coast. The Mexican peso (MXN) fell by 0.3% amid higher US Treasury yields, while the Turkish lira (TRY) slipped by 0.2%.

Major currencies: Top risers and fallers today – 19 April 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, 19 April 2022, 10:45 UTC – Photo: Capital.com

Forex market heatmap – April 19, 2022

A forex table showing the performance of US dollar and the euro against other currenciesForex market heatmap as of 19 April 2022, 10:45 UTC – Credit/Source: Capital.com

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