FX Daily: Fight the yen at your own risk

Daily Currencies Ratings, 08/09/2026 — Source: ING

USD: The USD/JPY story dominates

Yen moves have continued to dominate the start of the week. Thin liquidity due to the US holiday likely amplified yesterday's USD/JPY sell-off, pushing the pair through the key 155.0 level before extending to 153.0 overnight. This still looks primarily like a JPY story rather than evidence of a broader shift in sentiment towards the dollar. Fast money appears increasingly focused on a combination of a hawkish Bank of Japan and GPIF increasing domestic ownership — a reference to Japan's Government Pension Investment Fund, the country's largest public investor, whose portfolio allocation shifts can move capital flows on a scale relevant to currency markets.

Despite short-term fundamentals suggesting the move is overdone, it remains risky to stand in its way, particularly given the scope for further carry trade unwinding. Carry trades — positions funded in low-yielding currencies like the yen and invested in higher-yielding assets elsewhere — can amplify currency moves when they are unwound quickly, as episodes such as the August 2024 yen spike illustrated. The next meaningful support only comes in at 152.0, where the yen rally stalled in January and February. A break below that could quickly open the way towards 150.0. Whether such a move would prove sustainable if the Fed hikes next week remains an open question, but current volatility argues against trying to catch the falling knife.

The yen rally continues to spill over into broader dollar weakness, even as the wider USD narrative remains unresolved. Strong payrolls and elevated energy prices (Brent close to $100/bl) remain supportive, yet markets are still only pricing around 15bp of tightening for September and risk sentiment has held up well.

US equity futures point to a softer reopening today, which could lend the dollar some support against an otherwise empty calendar. ING continues to see the bullish case for the dollar as stronger in the near term, although Friday's US CPI release remains a clear risk event.

Francesco Pesole

EUR: Downside risks remain

Second-quarter eurozone growth was revised up from 0.4% to 0.6% QoQ, driven by stronger Irish growth on the back of robust multinational performance. More broadly, Europe's resilience despite geopolitical developments and higher commodity prices remains a key theme of the summer and has likely helped keep the euro relatively expensive.

The short-term downside preference in EUR/USD is still mainly driven by ING's USD view and expectation of a September Fed hike. That said, the latest rise in energy prices adds further support, since the eurozone is a net energy importer and higher import costs weigh on the currency. Real-time estimates suggest the eurozone's commodity terms of trade are now worse than at the previous low in March.

Ahead of Thursday's ECB meeting, ING sees some dovish risks given the market's aggressive tightening expectations. In that context, a move towards 1.150 over the coming weeks remains realistic in their view.

Francesco Pesole

GBP: Healey keeps markets calm

Sterling enjoyed a decent session yesterday, with some marginal support potentially coming from Chancellor John Healey's first major speech. He delivered a firm message on fiscal discipline, helping to keep the increase in long-end gilt yields broadly in line with the wider global bond sell-off. That stance is likely intended to reassure markets ahead of what could be a steady flow of headlines about the October budget in the weeks ahead.

How far those headlines test the market remains to be seen. Sterling is currently pricing in no fiscal risk premium, leaving some scope for market concern to emerge. The UK's experience during the 2022 gilt turmoil, when unfunded fiscal plans triggered a sharp bond sell-off, looms as a reminder of how quickly market confidence can erode. Even so, the government appears highly conscious of market sensitivities and unlikely to engage in a serious confrontation with the bond market, particularly given how quickly higher yields can consume any available fiscal headroom.

ING retains a positive bias on EUR/GBP primarily due to its assessment that Bank of England expectations appear way too hawkish.

Francesco Pesole

HUF: Inflation rebounds but is not a game-changer for markets

Today's data confirmed the expected rebound in Hungarian inflation, from 1.2% in July — the lowest reading in nearly 10 years — to 1.3% in August, though it again came in below market expectations. Even so, inflation is expected to remain below the central bank's target for the rest of the year. The NBH had forecast 1.8% for August, implying a forecast miss of 0.5pp, compared with 0.7pp in July.

The inflation outlook remains benign, but the NBH story has become more compelling since Bloomberg reported last week that the central bank was considering pausing rate cuts in September to pave the way for a lower inflation target ahead of euro adoption. Subsequent NBH comments suggest that any policy shift will have to wait until the September meeting and its new forecast. Since last week, the curve has flattened sharply and the Hungarian forint has strengthened, moves that today's data are unlikely to reverse.

ING expects euro-area spreads to tighten further, although higher global energy prices may limit additional forint gains. EUR/HUF has fallen below 364, but if gas and oil prices continue to rise, the rate may return above this level again given how the forint has recently returned to its previous high-beta behaviour.

Frantisek Taborsky

Source: ING, via Hellenic Shipping News