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The DXY Index finished the session at 99.2, firmly entrenched within the narrow 98.9-99.5 band set since mid-May. On the one hand, a cooling of geopolitical tensions softened the greenback’s haven demand. Apart from ongoing talks by the US and Iran to reopen the Straits of Hormuz, Lebanon announced a partial ceasefire between Hezbollah and Israel. Brent crude oil price has been languishing in a USD 90-100 per barrel range since May 25. On the other hand, the DXY’s downside was limited by the stronger-than-expected US JOLTS job openings report amid ongoing sticky inflation worries, steering more Fed officials towards a hike or maintaining its higher-for-longer rates trajectory.
USD/KRW is near the top of its 1490-1520 range set since mid-May, mainly as a proxy of the USD/JPY’s rise to 160. However, USD/KRW’s upside may be capped because the KRW/JPY cross rate is at the bottom of the 10.5-11 range, having been locked there since June 2025, following the Liberation Day tariffs. Some market participants have started to reassess the KRW’s upside potential, driven by the KOSPI’s stellar 74% AI-driven surge since April and the Bank of Korea’s hawkish tilt towards a rate hike at its July 16 meeting. South Korea’s GDP exceeded expectations by expanding 3.6% YoY in 1Q26, more than the consensus for a rise to 2.6% from 1.6% in 4Q25. Yesterday, CPI inflation rose to 3.1% YoY in May from 2.6% in April, driven mainly by the elevated energy import costs. Core inflation rose from 2.2% and converged with the BOK policy rate at 2.5%.
For now, intervention risks remain high for USD/JPY around 160. US Treasury Secretary Scott Bessent explicitly characterized "excessive exchange-rate volatility" as undesirable, which Tokyo has interpreted as tacit approval to avert an unchecked fall in the JPY. The Bank of Japan will need to support the Ministry of Finance by affirming the 25bps hike to 1% that the market has priced in for its June 16 meeting. Finance Minister Satsuki Katayama warned this morning that the authorities were ready to respond to forex as necessary at any time, adding that BOJ Governor Kazuo Ueda shared many of the same views. Speaking later today, Ueda will likely reinforce his recent comment that the global oil price shock was broad and consistent, emphasizing the need to prevent the JPY’s prolonged weakness from feeding into core inflation expectations and corporate price-setting behaviour. What is clear is that the market does not want a repeat of the balanced narrative that failed to back the Finance Ministry’s intervention efforts the last time.
Quote of the Day
“Life is the art of drawing without an eraser.”
John W. Gardner
June 3 in history
In 1968, the Royal Canadian Mint announced it would replace the silver in its coins with a nickel alloy beginning in August of that year.
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