EUROPEAN FX UPDATE: Yen manages to resist greater Greenback advances

Analysis details (10:25)

DXY/JPY/CHF

The Dollar index extended gains to set a new high at 114.780 before running out of steam alongside the benchmark US 10 year Treasury yield meeting more resistance around the psychological 4% mark. However, the Buck retained a firm underlying bid on fundamentals and rebalancing dynamics with bank models flagging a strong buy signal for month and quarter end on Friday. Hence, the DXY held ‘comfortably’ above 114.000 even though risk aversion and repatriation flows helped the Yen and Franc to a lesser extent avoid the Greenback’s clutches within 144.87-40 and 0.9966-00 respective ranges, albeit Usd/Chf firmed up in wake of a marked deterioration in Swiss investor sentiment.

AUD/NZD/GBP/CAD/EUR

In stark contrast to the above, firmer than forecast final retail sales failed to provide the Aussie with any protection from risk-off positioning or contagion from further Yuan devaluation, as Aud/Usd lost grip of yet another handle between 0.6445-0.6363 parameters, and the Kiwi fell in sympathy regardless of dowside in the Aud/Nzd cross towards 1.1400 from the high 1.1400 area, with Nzd/Usd retreating from around 0.5640 to 0.5565 ahead of ANZ business outlook and own activity readings for September. Elsewhere, the Pound unwound recent hard fought recovery gains amidst ongoing angst about UK debt and funding capabilities following widespread tax cuts in the mini budget that drew criticism from the IMF. Cable retreated from circa 1.0740 to 1.0631, while the Loonie lurched through 1.3800 as oil pulled back on bearish inventory data and the Euro faded near 0.9600 irrespective of latest hawkish ECB rhetoric and yet another ratchet up in EGB yields, to a sub-0.9550 trough.

SCANDI/EM

The increasingly sour mood took its toll on the Nok and Sek, with the former also undermined by Brent’s retracement and Equinor raising its state of readiness for an emergency in Norway, while the latter had worrying Swedish macro releases to contend with. Meanwhile, the Usd took more prisoners in the EM space, including the Cny and Cnh that plumbed fresh record lows, the Inr that gleaned scant support via more intervention and the Thb after an in-line 25 bp BoT rate hike.

28 Sep 2022 - 10:25- ForexData- Source: Newsquawk