The Japanese yen hit a 40-year low against the dollar amid rising Treasury yields, while China's manufacturing sector posted its strongest quarter since 2020. Geopolitical tensions with Iran and mixed corporate earnings added to market volatility.
Yen Slides to Fresh 40-Year Low as Dollar Gains Momentum
The Japanese yen extended its decline to a fresh 40-year low above 162.75 against the US dollar on Wednesday, driven by a firmer greenback amid rising Treasury yields. The dollar's strength was underpinned by expectations of prolonged Federal Reserve tightening, despite Fed Chair Warsh's scheduled speech offering no immediate policy signals.
Japan's corporate sentiment data provided little relief for the yen. The Bank of Japan's Tankan survey revealed big manufacturer sentiment at +22, its strongest since 2018, and big non-manufacturer sentiment at +37, the highest since 1991. Inflation expectations also rose across all time horizons, reinforcing concerns about persistent price pressures. The manufacturing PMI rose to 54.8, capping Japan's best quarterly performance since 2014, though the currency continued to weaken.
China's Manufacturing Sector Posts Strongest Quarter Since 2020
China's RatingDog manufacturing PMI eased to 51.7 in June, slightly below the prior reading of 51.8 but still signaling robust activity. The print capped the sector's strongest quarter since 2020, with input cost inflation moderating and hiring accelerating. The data underscored resilience in Asia's largest economy, though external demand risks remain amid geopolitical uncertainty.
Geopolitical Tensions and Oil Volatility
US Vice President Vance's comments on Iran, citing Al Jazeera, suggested readiness to resume strikes if nuclear talks fail, adding a risk-off tone to markets. However, oil prices remained rangebound, while gold slipped below $4,000. The uncertainty highlighted the fragility of global risk sentiment, with traders monitoring developments closely.
Company News and Policy Updates
Nike's quarterly results beat estimates but flagged a challenging consumer environment, with shares falling on cautious guidance. Meanwhile, the US Commerce Department lifted export controls on Anthropic's Fable and Mythos AI models, reversing a prior suspension over national security concerns. Trump's financial disclosure revealed over $1 billion in crypto income, primarily from his $TRUMP meme coin.
Trading Implications for USDJPY and Global Markets
The yen's slide reflects divergent monetary policy trajectories, with the BoJ maintaining ultra-loose settings while the Fed signals sustained tightening. Technical resistance for USDJPY remains near 163.00, with support at 161.50. Traders will watch upcoming BoJ and Fed communications for cues on intervention risks and yield dynamics. China's PMI stability offers modest support for regional currencies, though Iran-related volatility could spur safe-haven flows.
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