Asia Summary and Highlights 2 May

Asia Session

There is another suspected round of intervention from the BoJ in Asia time when only the NZ market was open. USD/JPY dropped close to five figures again to 153 and we so far did not see another round of intervention even when USD/JPY has rebounded to 156 figure. Some market chatter suggest BoJ is showing weakness as they looking for maximum pain for speculators with minimum USD reserve spent. From my perspective, if it is an actual intervention, BoJ is showing commitment and sending a strong signal they are against speculative shorts in JPY and are willing to inflict maximum pain, unlike the last intervention in 2022 and the soft rhetoric from Japanese cabinet officials last week. USD/JPY is trading 0.93% higher at 156.05 with session high at 156.29. Despite there has yet been a fundamental shift, nothing changes sentiment more than price. If the BoJ is committed to fight speculative shorts and keep hitting the intervention button, we may see a turn in the USD/JPY while the Fed is not delivering anything more hawkish.

The April Australian trade balance came in weaker than expected with exports m/m barely in positive territory of 0.1% and import slipped to 4.2% from 4.5%. However,the improving sentiment is in the driver's seat for the AUD/USD. Major equity indexes have resumed or rebounded the post FOMC drop with the HSI gaining more than 2%. Chinese market remain closed. AUD/USD is trading 0.25% higher at 0.6539, NZD/USD is up 0.04% while USD/CAD slipped 0.13% as oil recovered almost half a dollar. Else, EUR/USD is up 0.03% and GBP/USD is up 0.05%.

North American session

The USD finished slightly weaker against most currencies, after correcting from sharp losses that followed the FOMC statement and comments from Fed’s Powell at the press conference. USD/JPY, after moving with other currencies in response to the FOMC, did however see a fresh sharp slide to near 156 after the equity close. 

The FOMC statement noted a lack of recent progress on inflation and announced a tapering of QT starting in June, with other adjustments to the statement minor. This saw the USD slightly weaker and losses were extended when Powell stated that the next move was unlikely to be a hike. USD/JPY tested 157 while EUR/USD peaked at 1.0733. However by the end of the session USD losses and equity gains were largely reversed, some noting a Powell comment that left open the possibility of higher rates, though UST yields remained lower, particularly at the front end.

Ahead of the FOMC, data had a limited impact. ADP employment was slightly stronger than expected with a rise of 192k, but JOLTS data showed a 325k fall in job openings and the ISM manufacturing index was weaker than expected at 49.2, though with a stronger prices paid index of 60.9. There was not much reaction to the data but USD/JPY did see a dip to 157.40 with UST yields, more on relief at refunding details were auction sizes were left unchanged  than the data.