FX Update: JPY rally a choppy affair. RBNZ surprises with big hike. FX Update: JPY rally a choppy affair. RBNZ surprises with big hike. FX Update: JPY rally a choppy affair. RBNZ surprises with big hike.

FX Update: JPY rally a choppy affair. RBNZ surprises with big hike.

John Hardy

Head of FX Strategy

Summary:  A chop-fest across much of FX since yesterday, after a weak US job openings survey jolted US yields lower, triggering a steep rally in the JPY, which has faded in places in today’s trading as yields have chopped back higher. The RBNZ surprised overnight with a large hike, and while AUDNZD has been pounded to new cycle lows, NZDUSD is actually lower than where it traded before the RBNZ decision.

Our Q2 Outlook, titled The Fragmentation Game is now out.
Today's Saxo Market Call podcast
Today's Global Market Quick Take: Europe from the Saxo Strategy Team

FX Trading focus: JPY resets higher on US treasury yield drop after weak US job openings data. RBNZ surprises with big hike, sends AUDNZD to new cycle lows.

The February JOLTS job opening survey in the US surprised with a reading of 9.9 million jobs, over half a million below expectations and with a -260k revision to the prior number. It shouldn’t have garnered the scale of reaction it got, but that just shows how sensitive the market is here to anything confirming fears of an economic slowdown. As I discussed in this morning’s Saxo Market Call podcast, the JOLTS survey quite noticeably lagged the nonfarm payrolls change cycle in the prior two “normal” recessions in 2001 and 2007-08. Luckily, we have plenty more US data to entertain us over the coming week, including today’s March ADP payrolls change and March ISM Services, tomorrow’s latest weekly initial jobless claims number, Friday’s March jobs report and the March CPI print next Wednesday.

With the plunge in yields and risk sentiment finally wobbly rather than celebrating the drop, the JPY has ideal conditions to make a statement, which it about 50% did – pulling sharply higher versus the US dollar, but merely bouncing back from weakness elsewhere. To get more upside in JPY we’ll need to see the US 10-year sticking new cycle lows below 3.25% and for the global growth outlook and risk sentiment to deteriorate, with a helpful push back lower in crude oil prices possibly also on the wish list. For now, the USDJPY is still “underperforming” to the downside relative to its traditional coincident indicator, the US 10-year treasury yield, which closed at its lowest level for the cycle near 3.35%, if several basis points above intraday lows during the recent banking turmoil in March.

Broad weakness in the US dollar yesterday was partially reversed on weakening risk sentiment, and key individual USD pairs reversed entirely in the European session today. AUDUSD has been pounded back below 0.6700 (in part on AUDNZD flows – more below) even after RBA Governor Lowe was out overnight trying to position this week’s hold on further interest rate increases as not necessarily a lead-in to eventually cutting rates: “The decision to hold rates steady this month does not imply that interest rate increases are over,” and  “Indeed, the board expects that some further tightening of monetary policy may well be needed to return inflation to target within a reasonable timeframe.” The

The opposite impressions drawn from the RBA and RBNZ meeting this week have triggered a sharp slide in AUDNZD, as the RBNZ waxed hawkish and surprised with a 50-basis point hike overnight, with no indication that it is guiding for a pause. The larger hike from the RBNZ immediately transmits into the yield spread, which for the 2-year swaps has now dipped to within 10 basis points of the lowest weekly close since the 1990’s at -162 basis points. RBA expectations for the coming few meetings are flat, while about a single further 25 basis point hike is priced in for the RBNZ despite the overnight 50 basis point move (25 basis points only was expected – also by me, and I was even leaning for a guidance shift). In the coming one or possibly two quarters, I suspect one of the central banks will be seen as having committed a policy mistake, whether it is Australia in having moved too cautiously as it seemed to want to avoid too much transmission of policy into slowing the economy and household budgets, or the RBNZ having taken things too quickly and causing a more disruptive unwind in the housing market and perhaps the wider economy (or is it a recession by design?). The March CoreLogic NZ home price data showed home prices declining at a record -10.5% YoY clip, just “eclipsing” the -9.7% low of the 2008-09 cycle. But note that we are coming off peak home price rises of higher than 25% YoY in late 2021 and into early 2022. AUDNZD is working down into its minimum valuation region assuming the policy divergence can't stretch much wider from here.

Source: Saxo Group

Table: FX Board of G10 and CNH trend evolution and strength.
Note the strength in gold and especially silver here – it this a vote of no-confidence in fiat currencies generally? I suspect it is… Otherwise, while sterling sits at the head of the class in relative strength among G10 currencies, it is difficult seeing it retaining that status if broader sentiment is primed for a setback. The JPY should have room to “roar” soon if this decline in yields continues and is accompanied with the coincident concern for the global outlook (weaker risk sentiment).

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
The AUDUSD reversal back below its 200-day moving average suggests the end of the recent breakout attempt to the upside. NZDUSD reversed badly today as well after the RBNZ shocker goosed the price action to 0.6379 overnight – trading below 0.6300 near the time of this writing.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights

  • 1215 – US Mar. ADP Employment Change
  • 1230 – US Feb. Trade Balance
  • 1230 – Canada Feb. International Merchandise Trade
  • 1345 – US Mar. Final S&P Global Services PMI
  • 1400 – ECB Chief Economist Lane to speak
  • 1400 – US Mar. ISM Services
  • 0130 – Australia Feb. Trade Balance
  • 0145 – China Mar. Caixin Services PMI


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.