(Bloomberg) -- Haven currencies outperformed their G-10 peers amid escalating Middle East tensions and weakness in US tech shares ahead of Wednesday’s Fed policy decision.
- The Bloomberg Dollar Spot Index is marginally higher, paring gains after setting a fresh three-week high earlier amid solid corporate and month-end flows; offshore yuan rises 0.3%
- US 10-year Treasury yields slipped 3bps to 4.14%; US 2-year Treasury yields also fell as shares and WTI oil prices drop
- US job openings came in above forecast last month after May’s reading was revised higher
- US consumer confidence rose in July as improving expectations for the economy and labor market offset bleaker views of current conditions.
- USD/JPY is down 0.5% at 153.27 after trading a 152.99-155.22 session range, weighed down by lower Treasury yields, sterling-yen sales and commercial flows.
- Recent yen weakness has done more harm than good for the Japanese economy, according to Japan’s newly appointed top foreign exchange official, who cited intervention among the measures available to counter speculation that weighs excessively on the currency.
- Bank of Japan board members will discuss raising interest rates to around 0.25% from the current range of 0 to 0.1%, public broadcaster NHK reports, citing unidentified people.
- Overnight yen volatility climbs to a three-month high of ~24.5%, or 160 pips breakeven, ahead of a BOJ decision Wednesday; risk reversals shift in the yen’s favor across tenors
- Overnight-indexed swaps priced in a roughly 50% chance that the BOJ will raise its policy rate by 15 basis points this week
- “If we see 15 bps overnight as a hike then JPY might respond, but until then it’s all talk and no action,” said Helen Given, a foreign-exchange trader at Monex Inc. “There isn’t enough economic activity I think to justify a 15 bps hike”
- EUR/USD slips 0.1% to 1.0812 as European yields ease following mixed German regional CPI reports and a surprise contraction in Q2 GDP
- EUR/CHF slips as much as 0.5% to 0.9545 on haven-related selling
- GBP/USD falls 0.2% to 1.2833; one-week volatility holds near a six-week high as Thursday’s Bank of England policy decision nears
- AUD/USD is down 0.2% at 0.6527; overnight volatility rises to 13.2% ahead of a CPI release Wednesday
- USD/CAD is steady at 1.3852; gains capped by corporate sales after pair touched an eight-month high of 1.3865 Monday
Reporting by Robert Fullem With assistance from Anya Andrianova and Masaki Kondo.
