Global FX: Dollar down after FOMC, MoF intervention

Recent volatility in the FX market stems from a combination of Federal Reserve policy shifts, Japanese Ministry of Finance (MOF) intervention, and central bank updates from Australia and the UK. The dollar suffered a tactical setback following the FOMC meeting, as Chair Powell’s communication raised questions regarding Fed credibility and inflation risk premiums. Meanwhile, the MOF’s intervention to support the yen faces diminishing returns due to limited FX reserves and the absence of coordinated international action. In Australia, the RBA appears to have concluded its hiking cycle following a material downside surprise in inflation, while the Bank of England maintains a neutral outlook. Despite hawkish dissent within the BoE, policymakers remain cautious, prioritizing patience as they navigate soft demand and labor market cooling. These developments underscore a complex global environment where carry trades remain a primary focus for market participants.