Yen Drops Under Pressure Aud Slips After Inflation Report

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Yen Drops Under Pressure Aud Slips After Inflation Report

Yen Drops Under Pressure; AUD Slips After Inflation Report

Japanese Yen (JPY) was under pressure during Wednesday's session. This comes despite the fact that Japan has made it clear they will intervene in the FX markets to support the JPY. Similarly, the AUD also dropped as inflation slowed down during May.

If we look at the Japanese Yen, the market believes that the BOJ will continue to maintain ultra-low interest rates. At the same time, other central banks are introducing rate hikes to curb the inflation. This is weighing heavily on the JPY and has raised speculations about whether the BOJ will step in to change the course or not!

JPY Is Closely Watched By BOJ

According to a currency diplomat from Japan, they are closely watching the JPY currency moves. They also added that this matter is of strong urgency for the country. In fact, they also said that the BOJ would take appropriate action if the FX movement became excessive.

On Wednesday, the USD gained against the Yen, which took the USD/JPY pair to 144.2. If we look at history, the current level of USD/JPY is at a 7-month high.

Similarly, the Euro (EUR) is now sitting at a 15-year high against the Yen (JPY). When checked last time, EUR/JPY was trading near 157.94.

According to experts, the Dollar's advance against the Yen will continue, which has increased the risks of BOJ intervention in the FX market.

It is also worth noting that the speed of the FX change is what matters the most rather than the level. So when it comes to intervention, the speed of change in the JPY is of more importance.

Meanwhile, the AUD is now trading at a 3-week low due to the recent inflation report. On paper, the inflation report is good for the economy, which means the RBA now have some room to stop rate hike or even cut rates. Now that's something which is bearish for the AUD and that's what we are seeing in the FX markets.

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