Forex trading reminder: the yen is higher in the intervention warning, the overall trading of the US holiday is quiet, pay attention to the Federal Reserve meeting notes

The dollar fell slightly against the yen on Tuesday as markets remained on high alert for signs of Japanese intervention, but remained generally calm as U.S. traders were on vacation for a public holiday.

At the beginning of Asian trading on Wednesday (July 5), the US dollar index fluctuated narrowly, currently trading around 103.09; the US dollar fluctuated narrowly against the yen, currently trading around 144.48. The dollar fell slightly against the yen on Tuesday, and the market was on high alert for signs of Japanese intervention, but the overall market remained calm as US traders were on vacation due to public holidays.

Activity was relatively subdued on Tuesday as US markets closed for a public holiday on July 4. Investors were also waiting for Friday's US non-farm payrolls report, which could influence the Federal Reserve's next decision. In addition, the Fed meeting notes, which will be released in the early hours of Thursday Beijing time, also attracted investors' attention.

The euro fell 0.28% against the dollar on Tuesday to close at $1.0877; the pound rose 0.15% against the dollar on Tuesday to close at $1.2710.

The dollar index, which tracks the dollar against six major rival currencies, closed at 103.09 on Tuesday, up about 0.11 percent.

Alvin Tan, head of Asian FX strategy at RBC Capital Markets, said: "It feels like something happens every week and this week we are waiting for the US non-farm payrolls data."

The Reserve Bank of Australia left interest rates unchanged at 4.10 percent on Tuesday, saying it wanted more time to assess the impact of past rate hikes, but warned that further tightening may be needed to bring inflation under control.

The Australian dollar fell by about 40 points to 0.6641 in the short term, but then rose sharply, reaching a new high of 0.6704 in the past week and closing at 0.6689, an increase of about 0.28%.

Markets are inclined to expect the Reserve Bank of Australia to keep rates unchanged on Tuesday after data showing inflation slowed slightly more than expected in May, according to pricing in derivatives markets, but traders betting on the future path of rates expect at least one more rate hike this cycle.

A number of central banks around the world raised interest rates in June, and seven of the nine central banks that regulate the 10 most traded currencies raised rates when they met in June, with two choosing to leave them unchanged, according to Reuters data.

The dollar fell 0.15 per cent to Y144.43 against the yen on Tuesday after gaining 0.25 per cent on Monday. But the yen remained close to the near eight-month low of Y145.07 it hit last week, prompting finance minister Shunichi Suzuki to warn against selling the currency too much.

Throughoutforeign exchange marketInvestors are still watching for possible intervention by Japanese authorities to stem the yen's decline.

Earlier on Tuesday, Japan's finance ministry treasurer, Makoto Kanda, said officials were in close contact almost daily with U.S. Treasury Secretary Janet Yellen and other overseas authorities about the currency and broader financial marekt.

Japan bought yen in September, entering the market for the first time since 1998 to boost its currency after the Bank of Japan's pledge to maintain ultra-loose policy as long as needed sent the yen down to Y145 against the dollar. Japan intervened again in October after the yen plunged to a 32-year low of Y151.94 against the dollar.

"The Bank of Japan is still reluctant to withdraw from the YCC policy, which will lead to a higher dollar," he said, referring to Japan's yield curve control policy, which has kept Japanese government bond yields low.

Tan said the dollar could rise above Y150, which would make intervention "more likely".

Wednesday Forward

institutional perspective

Danske Bank: The Turkish lira remains under downward pressure

Analysts at Danske Bank believe that Turkish President Recep Tayyip Erdoğan's new economic team has begun to normalize monetary policy. However, it will not be easy to reverse course without causing more pain, as imbalances in the economy have been building up for some time. We expect the central bank to gradually raise the policy rate to 25%, but not fast enough to raise the real rate to positive, especially as the recent currency depreciation is expected to drive future inflation. It is expected that credit demand will continue to rise, with continued downward pressure on the current account and lira.

Rabobank: The U.S. index may continue to move away from its spring lows

Rabobank economists say the dollar index DXY has been edging higher over the past few weeks after failing to retest its spring lows in June. For some time now, we have believed that the dollar's strength will peak around the middle of the year, before pulling back somewhat as markets anticipate the Federal Reserve will cut interest rates in 2024. Still, concerns about slowing global growth should prevent the dollar from taking heavy selling pressure. If markets continue to be skeptical about the possibility of tightening policy beyond July, then the dollar index is likely to continue moving away from its spring lows.

Pimco: Unexpected rate hikes by central banks make June a "bumper month" for rate hikes

The world's major central banks raised interest rates in June by the most so far this year, surprising markets and signalling more tightening ahead as policymakers struggle to gain the upper hand in the battle against inflation. Tiffany Wilding, an analyst at Pacific Investment Management (PIMCO), said that while some central banks have made initial progress in reducing inflation, overall, they still face a difficult balance. If fiscal policy is not ready to save the situation, we will see a more uncertain growth environment, with downside risks building up on a cyclical scale. Vanguard analysts, on the other hand, said in their mid-year outlook that they believe central banks have more work to do. In their view, the final stage of bringing inflation down to central bank targets may be the most challenging.

Nomura: EUR/GBP will rise steadily towards 0.88 by the end of this year

Economists at Nomura expect that the market has moved away from trading based on interest rate differentials and is now more focused on growth expectations, which suggests that the pound will strengthen; recent global survey results have been disappointing, resulting in a poor performance of currencies with high beta values. In addition, the market currently expects the Bank of England to raise interest rates by a cumulative 121 basis points before the end of the year, in sharp contrast to Nomura's forecast of 75 basis points. Nomura's leading indicators suggest that the UK CPI may unexpectedly go down in the second half of the year. Considering the market's overpricing of interest rate hikes and the possibility of an unexpected decline in the UK CPI, the EUR/GBP will steadily rise towards 0.88 and possibly even towards 0.90 by the end of the year.