[MARKET ANALYSIS] FX fails to take a lead from firmer energy; JPY hit on GPIF chatter, NZD helped as traders add to tightening bets

G10s are mixed against the Buck. Kiwi continues to benefit from rate repricing; JPY underperforms amid the familiar terms of trade/differentials factors.
USD fails to benefit from the lift in energy benchmarks (Brent Sept’26 +2.4%), following constructive Iranian Foreign Ministry rhetoric this morning: “defensive strikes of the Islamic Republic of Iran are solely against the bases” and “Iran is in contact with mediators”. This pulled both the Buck and Energy off session highs. In addition to the focus on geopolitics, the Greenback positions into a number of key risk events this week including CPI and Warsh’s testimony. Price action since the emergence of London participants has been bearish, with DXY falling from an overnight 101.22 peak, to a session low of 100.79. Levels to watch include the 21DMA at 100.91.
JPY underperforms amid the factors mentioned above, alongside the view that Finance Minister Katayama’s GPIF remarks last week were another episode of attempted verbal intervention. Source reports this morning noted Japan has no immediate plan to change target asset allocations of its state pension funds but could work within existing allowable ranges to direct more investment to domestic assets. A report which pressured the currency and saw it rise to a 162.35 peak as the source report further reduces the credibility of Katayama’s remarks (see 08:09 BST analysis). USD/JPY +0.2% returned to 162.00 after some pressure around Chief Cabinet Secretary Kihara “GPIF to tweak its basic portfolio as needed”.
Kiwi is the best G10 performer as markets add to RBNZ tightening bets with two 25bp hikes now fully priced - a handful of bps more than the close on Friday. AUD/NZD trundled lower since the Sunday re-open, marking a session trough just below 1.20. NOK initially benefited from the strength in energy benchmarks, but like the Greenback, faltered as benchmarks came off highs. NOK/SEK -0.1%.