The US dollar manages an uneven rally

US dollar shows mixed results

The US dollar staged an uneven rally overnight, recouping some losses in the EM space as the Turkish lira had another horrific session, and maintaining downward pressure on the euro and Commonwealth currencies while losing versus fellow havens, the Japanese yen and the Swiss franc.

The British Pound, Canadian, Australian and New Zealand collars remain under pressure as proxies for the commodity space and investor risk sentiment. Sterling is trading in the middle of a wider 1.3200 to 1.3350 range with USD/Cad looking likely to test 1.2850 this week. Both the Australian and New Zealand dollars continue to threaten their 2021 lows at 0.7100 and 0.6800. The euro rally appears to have run out of steam above 1.1350 as virus fears, looming tighter restrictions, and a divergence in monetary policy direction combine to cap gains. Trading at 1.3130 today, key levels at 1.1370 and 1.1200, with failure of 1.1200 heralding further losses to 1.1000.


A rise in US equity index futures today sees USD/JPY rise 0.25% to 113.25. The yen’s rally has been powered by easing long-dated US yields, and omicron fears spurring huge amounts of yen haven buying. A retest of 112.50 cannot be ruled out, especially if the omicron news tickers get more negative. Given that the Federal Reserve has tilted notably to the hawkish side, one cannot help but feel that a fall by USD/JPY to between 111.50 and 112.50 could represent very good value for buyers on a medium-term basis. The extreme nature of the Japan border closure could also weigh on the yen over the next few weeks.


Asian currencies gave back some of their gains overnight, as expected, as the omicron news ticker turner negative. The exception was the Korean won, which seems to be finding support from rising Bank of Korea tightening expectations and a booming export market. Elsewhere, the PBOC set a weaker yuan fixing versus the US dollar today, and that has fed through to more weakness in Asian currencies versus the greenback. The Turkish lira is 1.70% lower in Asia after President Erdogan sacked his finance minister and the central bank intervened to buy lira yesterday. The situation there becomes more farcical by the day, but any spillover into the wider EM space is limited to non-existent. The short-term direction in Asian FX will continue to be driven by omicron headlines.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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