Key facts
- The US dollar index fell from a two-month high.
- The yen hovered near the 160 per dollar level.
- Strong US services inflation data reinforced expectations of steady Federal Reserve rates.
- The Bank of Japan signaled a potential June rate hike.
- The US dollar surged against the yen, breaking past 160.
- Japanese officials warned of intervention.
- Stalled US-Iran peace talks and high oil prices bolstered the dollar's safe-haven appeal.
- The USDCAD pair corrected lower toward support between 1.3868 and 1.3877.
- US stocks declined, breaking an April rally.
- South Korea introduced measures to counter the won's slide to its weakest level since 2009.
- South Korea launched joint inspections of major foreign-exchange banks for the first time in 14 years.
- The Philippine central bank cautioned banks against using forex derivatives.
The US dollar saw significant fluctuations across global markets, driven by a confluence of economic data, geopolitical risks, and shifting investor sentiment. Initially, the dollar surged against the yen, breaking the 160 per dollar level, fueled by stronger-than-expected US jobs data. This surge was further supported by stalled US-Iran peace talks and high oil prices, which bolstered the dollar's safe-haven appeal. Japanese officials responded with warnings of intervention to support the yen. However, the dollar later slipped from a two-month high as optimism for a Lebanon ceasefire grew and market sentiment shifted towards riskier assets, overriding its safe-haven appeal. Strong US services inflation data reinforced expectations that the Federal Reserve will hold rates steady, while the Bank of Japan signaled a potential rate hike in June.
In other currency markets, South Korea unveiled targeted measures to counter the won's slide to its weakest level since 2009. Authorities pledged firm action against speculative trading and other activities amplifying recent market swings. This includes joint inspections of major foreign-exchange banks, the first such action in 14 years, to defend the won against speculative trading. The Philippine central bank also cautioned banks against using forex derivatives to profit from currency volatility, as the peso recently hit a record low against the US dollar.
The USDCAD pair experienced a correction, moving toward a support area between 1.3868 and 1.3877 after failing to sustain gains above 1.39238. This pullback followed a week-long rally attributed to geopolitical tensions, widening interest-rate differentials, and soft Canadian economic data. Technical levels to watch include the 100-hour and 200-hour moving averages.
US stocks also declined, breaking a rally that began in April. This downturn is potentially linked to an anticipated increase in the supply of publicly listed equities, driven by upcoming IPOs from major tech companies and private equity firms seeking to divest holdings. This contrasts with a trend of shrinking equity supply over the past 30 years, which has historically supported rising stock prices.