EUROPEAN FX UPDATE: Yen regains some poise, but Yuan remains pressured

Analysis details (10:03)

DXY/JPY

The Yen managed to keep its head above 144.00 against the Greenback once again amidst softer US Treasury yields and more supply from Japanese exporters, but also a notable pick-up in levels of verbal intervention. Top currency diplomat Kanda got the latest round of jawboning started and then Finance Minister Suzuki joined in before Chief Cabinet Secretary Matsuno joined the chorus with the central message it is important for currencies to move stably reflecting economic fundamentals, moves are being watched closely and with high sense of urgency given the sudden and one sided price developments. Usd/Jpy probed 143.00 in response having topped out around 143.71 and posting a fresh 2023 peak circa 143.87 last Friday, to keep the Dollar index capped within a 102.830-670 range.

CNY/CNH  

In stark contrast to the recovering Yen, there was little respite for the Renminbi on return from China’s Dragon Boat Festival holidays as reports indicated depressed levels of spending on travel to compound other signs of weak domestic demand and consumption. Moreover, S&P followed a raft of banks cutting 2023 forecasts for Chinese GDP, albeit not as drastically, at 5.2% from 5.5% previously. All this offset PBoC liquidity injections and a relatively firm midpoint onshore fix, with Usd/Cny climbing towards 7.2375 and Usd/Cnh topping 7.2400 before waning.

NZD/GBP/CHF/CAD

All firmer vs the Buck, as the Kiwi made more headway against the Aussie through 1.0850 due to less contagion with the Yuan and perhaps perversely after New Zealand’s Trade Minister said he had positive discussions with China on joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Nzd/Usd rebounded from sub-0.6150 to 0.6175 at best, while the Pound retained 1.2700+ status post-last week’s 50 bp BoE hike and pre-UK CBI distributive trades and the Franc held firmly above 0.9000 with impetus from SNB’s Jordan reiterating that the Central Bank will probably have to hike rates again and the recent 25 bp rise was likely not enough to fully get to grips with the high inflation in Switzerland, according to an interview with SRF. Elsewhere, the Loonie straddled 1.3150 awaiting a speech by BoC Deputy Governor Kozicki before Canadian inflation data tomorrow.

AUD/EUR

The Aussie was undermined by all too familiar negative factors, namely further Yuan depreciation and risk aversion, as Aud/Usd faded ahead of 0.6700 and drifted down to 0.6669, while the Euro lost tentative grip of the 1.0900 handle against its US rival on the back of a bleak German Ifo survey and downbeat accompanying commentary - see 9.00 BST and 9.03 BST posts on the Headline Feed for details.

SCANDI/EM

Russian rebellion rattled the Rub even though Wagner Group chief Prigozhin accepted a proposal by Belarusian President Lukashenko to stop the movement of his troops to Moscow and prevented a coup, while the Try extended its losing streak regardless of the CBRT simplifying securities maintenance regulation to increase the functionality of market mechanisms and strengthen macro-financial stability, as Turkish President Erdogan spoke with NATO Secretary General Stoltenberg and said Sweden must stop protests by PKK supporters for NATO membership. This may also have unsettled the Sek in the run up to the Riksbank on Thursday.

26 Jun 2023 - 10:03- Fixed IncomeData- Source: Newsquawk