USD Tumbles to Two-Month Lows Amid Yen Intervention and Disappointing Retail Sales
The US dollar has fallen to two-month lows due to several factors, including the recent Japanese yen intervention and disappointing retail sales data. The greenback's value has decreased significantly since mid-June, with its lowest level reached recently. Market volatility has eased over the past three weeks, following a 10% correction in the US tech-focused Nasdaq and a 43% decline in South Korea's Kospi.
The US dollar came under pressure last week after headline inflation matched expectations, producer prices surprised to the downside, and retail sales unexpectedly contracted. This led to a decline in the value of the greenback. The Australian dollar has gained despite the Reserve Bank of Australia reducing expectations for another rate hike. RBA Governor Michelle Bullock later pushed back against this interpretation.
The kiwi initially weakened after inflation expectations rebounded but stalled at key resistance near 0.5900. Former currency chief Mitsuhiro Furusawa warned that Japan could step into the yen market again, including in coordination with the US, if USD/JPY returns to levels seen before last month's intervention. He called for a Bank of Japan rate hike in September and suggested policymakers could signal a faster path towards 1.5%-1.75%. The government should not hinder the central bank's tightening efforts or its commitment to fiscal discipline.