FOREIGN EXCHANGE UPDATE

Japan’s Yen weakened further on Monday towards a 24-year low following the central bank’s decision last week to maintain its ultra-easy monetary policy. The U.S. Dollar was trading flat following a week of volatility which saw it edge away from a 20-year high against major rivals. The Dollar index stood at 104.70, under Wednesday’s high of 105.79, a level not seen since the end of 2002. The greenback increased 0.21% to 135.25 Yen, moving back towards Wednesday’s high of 135.60, the highest since October 1998, Reuters reports. With rate hikes last week by the U.S. Federal Reserve, Bank of England and Swiss National Bank, the Bank of Japan bucked the trend. Following the Fed’s rate hike unveiled on Wednesday, on Friday it reiterated its "unconditional" commitment to combatting inflation, despite mounting risks of a recession, during its monetary policy report to Congress. Fed Chair Jerome Powell is due to testify on Wednesday and Thursday before the Senate and the House. "The market was gearing up for a BOJ capitulation (but) got exactly the opposite," sending the Yen falling, according to National Australia Bank senior foreign-exchange strategist Rodrigo Catril. He added that, in contrast, the Fed's message of an ongoing aggressive fight against inflation "could not be clearer," and the Dollar has "regained its mojo.”

Elsewhere, the Euro rose 0.03% to $1.04935 on Monday, despite President of France, Emmanuel Macron losing control of the National Assembly in Sunday’s legislative elections. Whereas Sterling fell 0.09% to $1.2209. The Pound fell under the 1.20 mark last week against the Dollar, rallying on Thursday to 1.24 on the announcement of the Bank of England’s fifth rate hike since December. Sterling was also given a boost when the Dollar weakened along with U.S. government bond yields, following the Fed’s June monetary policy decision, Pound Sterling Live reports. “If inflation fails to cool, the Fed will have to maintain the 75bps pace of tightening into the summer; the June CPI data due, due July 13th and the July U. Michigan inflation expectations data on July 15th are key data reports to monitor,” said Shaun Osborne, chief FX strategist at Scotiabank. “For now, however, with the Fed looking fully priced and spreads not making new ground in the USD’s favour, the USD may struggle to improve,” he added. Moreover, the Dollar fell 0.11% against the Swiss Franc to 0.96845, whilst the Australian dollar decline 0.03% to $0.6934.