Rising intervention risks loom over JPY and KRW – DBS

FXStreet Insights Team FXStreet

Japanese Yen (JPY) and South-Korean Won (KRW) have fallen sharply against the US Dollar (USD) over the past three months, prompting warnings from Tokyo and Seoul. The Bank of Japan (BOJ) may bring forward rate hikes to curb imported inflation, while the Bank of Korea (BOK) cites the won’s weakness as a constraint on monetary easing. USD/JPY moves are likely to influence USD/KRW as intervention risks rise, DBS' Senior FX Strategist Philip Wee notes.

BoJ signals potential early rate hike amid Yen weakness

"We are increasingly wary of rising intervention risks in the JPY and KRW. Each currency has depreciated more than 5% against the USD over the past three months, briefly erasing this year’s gains last week. Finance ministers in Tokyo and Seoul have openly flagged one-sided and speculative moves in their exchange rates."

"On excessive currency weakness feeding imported inflation, the Bank of Japan stressed that it may bring forward its timeline for a rate hike without waiting until next year’s spring wage negotiations end. The Bank of Korea blamed the KRW’s weakness for limiting its ability to cut rates to support the domestic economy."

"Unlike Seoul, Tokyo has been explicit about its intervention threshold, stepping in before USD/JPY reached 160. When Japan intervened in July 2024, USD/JPY fell sharply from a 38-year high of 162. Given its high correlation with the JPY on an indexed basis this year, expect USD/JPY to pull USD/KRW lower when it falls."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.