EUROPEAN FX UPDATE: Yuan takes the spotlight off Yen to a degree

Analysis details (09:58)

JPY/CNH-CNY

More intervention overnight from Japan, but once again only verbal on the currency front in contrast to actual bond buying by the BoJ to defend its YCT. In fact, while the Government continues to give little away in terms of any limit to the extent of Yen weakness it is content to allow, the Bank resumed unlimited JGB purchases and announced a series of similar operations through to April 26, with an intent to anchor the 10 year yield around 0%, not just cap the benchmark cash rate at the 0.25% ceiling. However, the Usd/Jpy pulled back sharply from yet another two decade peak circa 129.42 amidst exporter offers and profit taking sales rather than option-related supply given the abject failure of barriers to put up any real resistance thus far, albeit those said to be waiting at 130.00 are apparently much larger. Conversely, the Yuan has fallen further through some key technical supports, such as the 200 DMA (6.4015) and with guidance from the PBoC via a weak onshore midpoint fix rather than easier policy as it held LPRs against expectations for cuts. Usd/Cnh is inching towards 6.4500, while Usd/Jpy is hovering above 128.50.

DXY

The Yen’s latest recovery rally is a factor, but the Dollar and index are generally softer, or fading to be more precise against the backdrop of retracing US Treasury and other global bond yields plus a loss of bullish momentum after the DXY matched yesterday’s 100.030 high and several Greenback/major pairings failed to breach recent range highs and lows. Next up for the Buck, US existing home sales, Usd 16 bn 20 year supply, Fed’s Daly and Evans as the DXY slips closer to 100.500, at 100.530.

AUD/NZD

It’s tighter at the top, but the Aussie is back in contention for top spot alongside its Antipodean peer as the higher yielding and beta currencies extract most from their US rival’s pull-back. Indeed, Aud/Usd is particularly perky given the aforementioned Renminbi weakness and back on a 0.7400 handle, while the Kiwi has bounced over 0.6750 and is pivoting 1.0950 on the Aud/Nzd cross awaiting NZ Q1 CPI.

CAD/EUR/CHF/GBP    

All firmer vs their US counterpart, with the Loonie also looking toward inflation data for independent impetus, the Euro underpinned by more decent option expiries, the Franc paring declines from fresh multi-year lows and Sterling striving to fend off Eur/Gbp headwinds and keep its head above its y-t-d base. Usd/Cad is around 1.2570 and back below the 200 DMA, Eur/Usd is probing 1.0830 with 1.2 bn expiry interest providing a cushion between 1.0800-10, Usd/Chf is some 50 pips south of a 0.9536 apex and Cable is 30 pips or so off a 1.2990 trough.

SCANDI/EM

Buoyant risk sentiment is keeping the Sek and Nok afloat, but the Zar is still in reverse gear following mixed SA CPI prints and the Rub is extremely volatile partly due to ongoing liquidity constraints and Russia declaring a loss of confidence in Ukraine’s negotiators or the CBR relaxing foreign currency controls for exporters, excluding energy and commodity firms. Elsewhere, the Czk largely took stronger than expected Czech PPI prints in stride and comments from CNB Governor Ruznok - see 9.49BST post on the Headline Feed for more.

20 Apr 2022 - 09:58- Fixed IncomeData- Source: Newsquawk