Global Currencies Wobble Amid US Dollar Stabilization

What’s going on here?

The US dollar steadied on June 5, 2024, as traders grew wary in emerging markets ahead of a Canadian

interest

rate decision and US services data.

What does this mean?

The Swiss franc climbed for the fourth straight session, closing in on its 200-day moving average at 0.8902 per dollar. Meanwhile, the Japanese yen slipped by 0.2% to 155.27 per dollar and stood at 168.74 against the euro. The euro held steady at $1.0878 in Asian trading, while the British pound slightly softened to $1.2770. The Australian dollar dipped to $0.6443 ahead of GDP data, which Westpac forecasts will reveal the slowest growth rate since 1991, excluding pandemic years. The New Zealand dollar remained stable at $0.6173. The Canadian dollar hovered around the midpoint of a months-long range at C$1.3678 per dollar, with a 75% chance of a 25 basis point rate cut already anticipated. Despite a drop in US

bond

yields, major currencies showed minor easing against the dollar.

Why should I care?

For markets: Emerging market currencies remain under pressure.

The yen is this year’s worst-performing G10 currency, and the Bank of Japan’s Deputy Governor has stressed the need to be ‘very vigilant’ about its impact on the economy and

inflation

. Japanese real wages fell for the 25th straight month in April, unable to keep up with inflation. Australia’s top central banker hinted that first-quarter growth would be weak due to high interest rates. Meanwhile, India’s rupee dropped to a seven-week low, and the South African rand saw

volatility

after the African National Congress lost its parliamentary majority for the first time in 30 years.

The bigger picture: Political shifts and economic uncertainty loom large.

The Mexican peso tumbled over 4% against the dollar and nearly 6% against the yen after the Morena party’s strong electoral showing ignited fears of major structural reforms and increased government control over businesses. This uncertainty led investors to pull back on popular ‘carry’ trades. Rabobank’s strategist suggested further yen short covering ahead of the Bank of Japan’s June 14 policy decision. Amid these global upheavals, all eyes are on US services ISM and partial jobs data for further market direction.