USD/JPY breached 162 for the first time since 1986, yen at 40-year low, as Japan's warnings failed. China PMIs beat, PBOC added liquidity, RBA stayed hawkish.
USD/JPY broke above 162 for the first time since December 1986, touching a high near 162.40. Japanese officials tried to head off the move. Chief Cabinet Secretary Kihara reiterated that Tokyo stood ready to act while the pair was still under 162. Finance Minister Katayama followed with a similar line, saying Japan would respond appropriately and any action could be decisive, in line with the joint statement with the United States. Neither warning slowed the slide. The yen recovered little of the ground lost as of this writing.
The failure of verbal intervention shows the depth of the yen's slide. Japan has spent roughly 9.8 trillion yen in intervention since late April. The market's next question is whether the next line lies at 165 or higher. The Bank of Japan's newest policy board member will speak at 5pm Tokyo time, a potential flashpoint for any signal on the currency's impact on the rate path.
On data, China's June official manufacturing PMI returned to expansion, beating expectations. The non-manufacturing PMI improved to 50.2, above the 49.9 consensus. The composite measure rose to 50.6. Gains were concentrated in sectors tied to global technology demand, while domestic conditions remained weak. That divergence persisted, underlining the uneven nature of the recovery and its reliance on external demand.
The People's Bank of China kept its new overnight reverse repo rate at 1.25%, 15 basis points below the seven-day reverse repo rate. It doubled its liquidity injection to 600 billion yuan, roughly $88.3 billion, to help banks manage month-end funding pressures. Separately, Bloomberg reported China has clamped down on the issuance of higher-yielding offshore debt, a move that could reduce funding options for some Chinese borrowers.
Minutes from the RBA's June meeting reaffirmed that policy needs to stay restrictive. Members reiterated a willingness to raise the cash rate if conditions warrant. That hawkish stance supported the AUD near session highs.
The dollar firmed modestly overall. Oil traded rangebound. Gold slipped back below the $4,000 mark. Japanese equities rose nearly 1%. Hong Kong and mainland Chinese shares weakened.
The BoJ's new board member speaks at 5pm Tokyo time.
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