The USD/JPY currency pair came under new strain, first testing back down toward the 144.00 level in the early Asian session on Wednesday. The move came on the heels of comments on the bond market by Bank of Japan (BoJ) Governor Kazuo Ueda. Inhospitable as it is to innovation, Treasury Secretary Shunichi Kato recently raised alarm bells regarding its current form. Their comments led to an abrupt recovery in the Japanese Yen, a currency movement that sent shockwaves across the entire region.
The New Zealand Dollar (NZD) has been relatively flat, hovering in the low/mid-0.5900s. Traders are counting on at least a pause in the Reserve Bank of New Zealand’s (RBNZ) interest rate hiking cycle at its meeting on 5 April. On Wednesday morning, the NZD/USD pair was trading in a range just above 0.5950. Traders are understandably hesitant to make any big bets until there’s more clarity on RBNZ policy itself.
In addition to the currency turbulence, this period has included dramatic fluctuations in the gold market. As of early Wednesday morning, gold had reclaimed the $3,300 threshold, lifted by persistent geopolitical unrest and worries about U.S. fiscal policy. As tensions over the Russia-Ukraine war rise further, gold has seen a resurgence of dip-buyers, cementing gold’s safe-haven asset status.
That overnight recovery of the U.S. dollar has quickly lost steam. Fears over fiscal sustainability and optimism over future Fed rate cuts are mounting. These combined factors have propped up the non-yielding gold price, leading to an increase as investors flock to safety amid heightened market volatility.
The relationship between these currencies and many commodities illustrates a larger story of risk aversion amongst traders. The comments from BoJ officials certainly influenced the USD/JPY dynamics, as Governor Ueda’s and Minister Kato’s remarks highlighted vulnerabilities in Japan’s bond market that have implications for monetary policy moving forward.
Even as the Asian session developed, participants were increasingly awaiting the urgency of a crucial RBNZ policy announcement. The policy decision is considered to be pivotal for NZD/USD traders, with a change in policy anticipated to change the tone of the market. The muted response from traders is indicative of a wait-and-see approach to get more data before placing trades.