FOREX: USD Strength Extends Amid Sharp Yield Rise, Risk Sensitive FX Pressured
* The significant shift higher for US yields on Wednesday has further boosted the US dollar, extending the recent optimism for the greenback following last week's Fed decision. On the session, a reversal higher for oil prices and stronger-than-expected US PMI data have provided key USD tailwinds. Added to the fixed income dynamics, a weaker equity backdrop has helped the DXY extend beyond the 101 mark, with the index suddenly back within 1% of the year's 101.80 peak reached in June. * In terms of the G10 majors, EURUSD is sinking further below 1.14, while USDJPY has made a convincing break above both the post-BOJ highs and the 50-day EMA just above the 158 handle. However, it's the higher beta currencies that continue to bear the greater brunt of the cross-asset moves, with the likes of AUD, NZD and SEK remaining the poorest performers, down by around 1%. * AUDUSD has been testing an important support trendline in late trade, drawn from the Nov 2025 lows. This provides an interesting backdrop ahead of the August labour market report in Australia, the highlight of the APAC calendar on Thursday. Clearance would bolster the likelihood of a more protracted selloff towards 0.6922 and 0.
* The significant shift higher for US yields on Wednesday has further boosted the US dollar, extending the recent optimism for the greenback following last week's Fed decision. On the session, a reversal higher for oil prices and stronger-than-expected US PMI data have provided key USD tailwinds. 80 peak reached in June. 14, while USDJPY has made a convincing break above both the post-BOJ highs and the 50-day EMA just above the 158 handle.
However, it's the higher beta currencies that continue to bear the greater brunt of the cross-asset moves, with the likes of AUD, NZD and SEK remaining the poorest performers, down by around 1%. * AUDUSD has been testing an important support trendline in late trade, drawn from the Nov 2025 lows. This provides an interesting backdrop ahead of the August labour market report in Australia, the highlight of the APAC calendar on Thursday. 6865 next.
* Highlighting the vulnerability for risk sentiment on Wednesday, the emerging market FX complex has plummeted, with the EM FX basket approaching 1% declines today. 5% losses on the day. USDMXN continues to standout, where a close at current levels would represent the largest nominal appreciation since March. 6764 are the next target.
* After Aussie jobs data, the focus will be on CB decisions in Sweden, Switzerland and Norway. Meanwhile, headlines emanating from the Trump-Xi summit will garner significant attention.