- The governments of Japan and the United States have confirmed a joint intervention in the foreign exchange market. Tokyo has sold approximately $70 to $80 billion over the past three days, yet the dollar remains resilient. The re-pricing of the Federal Reserve's hawkish rate hike expectations has provided crucial support.
- The British pound against the US dollar (GBP/USD) and the euro against the US dollar (EUR/USD) are under downward pressure, with market focus gradually shifting to key macroeconomic data such as the US non-farm payrolls and JOLTS job openings to be released this week.
- The US Treasury has been hinted to possibly use the Exchange Stabilization Fund to sell euros against the yen, indirectly aiding the intervention. Despite multiple favorable factors, the euro remains sluggish, with the key support level moving down to the 1.1500 mark.
US-Japan Coordinated Intervention Struggles to Suppress Dollar Resilience
Regulatory authorities in Japan and the US have recently confirmed a joint intervention in the forex market. Japanese authorities have sold nearly $80 billion over the past three trading days. However, the US Dollar Index (DXY) has not weakened as expected, instead showing strong resistance to decline. This anomaly indicates that the market's pricing of the Federal Reserve's tightening cycle remains robust, with capital flows still concentrated in high-yielding dollar assets. Short-term selling pressure is quickly absorbed by dip-buying safe-haven funds.
Hawkish Reassessment Boosts US Treasury Yields
As the market reinterprets statements from Federal Reserve officials, the probability of a rate hike in September has risen to 16 to 17 basis points. The rebound in rate hike expectations has directly stabilized the yield on the US 30-year Treasury bond above 5.20%, with the 30-year mortgage rate rising to 6.75%. The high borrowing costs further tighten financial conditions, attracting global fixed-income funds to flow into the US, providing a solid interest rate base for the dollar index in the 99.35 to 99.40 support range.
This Week's Non-Farm Data as a Policy Touchstone
The next phase of forex market trends will heavily depend on this week's dense US labor market data. The market will assess economic resilience through the upcoming JOLTS job openings and non-farm payroll reports. If new jobs remain in the 75,000 to 80,000 range, it may not be enough to force the Federal Reserve to turn dovish. Traders generally maintain a cautious wait-and-see stance, with major non-US currencies like the British pound against the US dollar (GBP/USD) fluctuating with the dollar index, lacking independent upward momentum.
Euro Constrained by Cross-Currency Hedging Operations
The euro against the US dollar (EUR/USD) is relatively sluggish, despite the eurozone's solid fundamentals and falling oil prices, with the exchange rate still pressured around 1.1526. Market analysis suggests that the US Treasury may have used the Exchange Stabilization Fund's (ESF) euro reserves to indirectly aid intervention by selling euros against the yen (EUR/JPY). This cross-currency liquidity hedging has weakened the euro's rebound momentum, and if it falls below the 1.1500 mark, the risk of valuation reassessment will further increase.
