AUD Surges Past 0.7000 as Tokyo Intervention Sends Ripples

The Australian Dollar (AUD) has cleared a significant figure of 0.7000 against the US Dollar (USD), marking its strongest session in weeks. The AUD/USD pair traded above 0.7000 after a 1.06% advance, cutting through the 50-day Exponential Moving Average (EMA) at the same level.

The domestic week was dovish, with Australia's second-quarter inflation report on Wednesday pricing an August hike out of the Reserve Bank's curve. The trimmed mean measure the Reserve Bank targets printed 3.6% YoY, below the 3.8% forecast in May, and the monthly headline rate eased to 3.8% from 4.0%. Markets took the August hike out of the curve within the hour.

The move came from Tokyo, where suspected Japanese intervention led to a sharp decline in the USD/JPY pair by over five Yen in minutes. This collapse had a ripple effect on every Dollar pair on the board, pushing the AUD/USD up 1.06%.

However, it's worth noting that this gain came at the expense of the Japanese Yen, which took close to 2% out of the AUD. The carry problem for the AUD is not against the USD but against its funding currency, the Yen. A second round of Japanese intervention could have significant implications for the AUD.