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AUD/JPY Returns To The 89.00 Level As Demand For The Yen As a Secure Haven Wanes
AUD/JPY rebounds after rapid actions to address emerging financial turmoil. Central banks intervene to save institutions that are experiencing liquidity shortages. After a lengthy absence, the Japanese Yen's dynamics have returned.
In a risk-averse environment, the risk proxy AUD/JPY was pummeled earlier this week, sending the pair to the 87.50 level. The emergence of the liquidity crisis in the US banking sector revealed who was swimming without clothes.
This week was a roller coaster, with a number of banks experiencing liquidity shortages in order to conduct regular market operations. SVB, Signature Bank, Credit Suisse, and The First Republic Bank are among the institutions. No one anticipated such a rapid rate of banks plunging into the liquidity trap following the SVB collapse.
It appears that rising interest rates and quantitative tightening have suffocated global liquidity and are exerting pressure on banks. Wednesday was a difficult day for the AUD/JPY pair as Credit Suisse's problems, a key player in global operations, prompted significant risk aversion.
As the media focused on Credit Suisse, several important central banks took action. The Bank of England (BoE) engaged in significant discussions with international counterparts, and the Swiss National Bank (SNB) offered a CHF50 billion covered loan facility.
First Republic Bank encountered similar difficulties in the United States, but a pool of liquidity was provided by prominent banks including JPMorgan, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley.
During the previous trading session, the AUD/JPY was bolstered by these contingency plans and swift actions to address the emerging liquidity crisis. Despite positive Australian employment data, the AUD/JPY traded largely in accordance with risk sentiment this week.
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