As the trading day begins, USD/JPY and AUD/USD are back above 145 and 0.65, signaling a potential shift in market sentiment. According to OCBC senior FX strategist Philip Wee, this resurgence comes amidst profit-taking in the Asia ex-Japan currencies.
Short-Term Risk Aversion Levels Off
At the start of the week, the Japanese Yen (JPY) saw a 3.4% rally against the Greenback, with USD/JPY reaching 141.70. However, by the end of the session, the JPY had only retained 1.6% of its gains, settling at 144.18.
Meanwhile, AUD/USD experienced a reduction in losses, dropping from 2.5% to 0.2% (0.6498) after hitting a low of 0.6350. The Reserve Bank of Australia is expected to push back against market expectations of a rate cut in November or December, providing support for the Aussie dollar.
Overall, the current market conditions suggest a potential levelling off of short-term risk aversion, with investors capitalizing on profit opportunities in Asia ex-Japan currencies like USD/JPY and AUD/USD.
Analysis:
In summary, the recent movements in USD/JPY and AUD/USD indicate a shift in market sentiment, with profit-taking driving both currencies above key levels. The Japanese Yen’s initial rally against the Greenback has moderated, while the Australian dollar has found support from the Reserve Bank of Australia’s stance on interest rates. This development may signal a temporary pause in risk aversion, presenting opportunities for investors in the forex market. Stay tuned for further updates on these currency pairs as market conditions evolve.