USD/JPY has broken above 161, reaching levels that previously triggered market interventions. While this rebound is broadly consistent with USD strength following the FOMC, it also highlights that large speculative JPY short positions have not eased despite the BOJ’s rate hike this week. Japan’s tolerance for JPY weakness appears close to its limit, given that authorities intervened to sell USD/JPY to the tune of USD73bn in late April-May. Policymakers may deploy both rhetoric and further market interventions to curb JPY depreciation, with falling oil prices also offering some support to the currency.
US President Trump and Iranian President Pezeshkian have signed an interim MoU to end the Middle East conflict, reopening the Strait of Hormuz to all traffic while negotiations towards a final agreement continue. Admittedly, disagreement remain over nuclear and other key issues, but the deal signals a clear switch from US military pressure to diplomacy. Brent prices have now declined to around USD76, which should temper inflationary pressures and support oil-sensitive Asian currencies.
GBP/USD could see further volatility after easing towards 1.32, as Labour’s Burnham leads in the Makerfield by-election. Widely regarded as one of Labour’s most popular figures, Burnham is expected to challenge PM Starmer for the party leadership once he enters parliament. He is known for advocating left-leaning policies, and it remains unclear whether he can successfully navigate the fiscal rules that have limited Starmer’s policy agenda, particularly in defence and taxation. Such political uncertainty could trigger a sell-off in Gilts and weigh on GBP. That said, Burnham is reportedly seeking guidance from well-known economists such as Andy Haldane and Jim O’Neill to bolster policy credibility.
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June 19 in history
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The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
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