FX Analysis – USD bounces, Hot CPI fails to lift AUD, JPY softer on rising US yields

The USD saw decent strength in Wednesdays session, with The US Dollar Index (DXY)  rising from an open of 104.67, pushing through the resistance at 105  to hit a high of 105.14 on the back of firmer US Treasury yields. Despite this rally DXY is heading into the end of the month looking to have its first monthly decline since December 2023. Ahead today we have US GDP as well as several Fed speakers, including Williams at the Economic Club of NY.

JPY declines against a resurgent USD with rising US yields pushing the US10Y-JP10y rate differential higher. USDJPY remained above 157.00 and pushing to a high of 157.74 and back in the April intervention zone. Remarks from BoJ Board Member Adachi, who stated that if excessive Yen falls are prolonged and expected to affect the achievement of the BoJ’s price target, responding with monetary policy becomes an option, failing to help the Yen significantly.

AUD, and to some extent NZD, saw some short lived strength after a hotter than expected Aussie CPI reading in the APAC session. This strength did fade in the UK and US session with both the AUD and NZD currencies resuming their weakness, tracking risk appetite. AUDUSD just holing above the psychological 0.66 level heading into Thursdays APAC session.