Light USD Demand Develops

We have seen some USD demand creep into Asia-Pac trade, with the greenback now only bettered by the SEK within the G10 FX space. The move has come alongside U.S. e-mini futures pulling back from best levels, while U.S. Tsy yields moving back from their early peaks (but still hold higher on the day across the curve) and a higher-than-expected USD/CNY mid-point fixing i.e. weaker than expected fixing for the CNY (150 pips above the BBG median). Outside of the CNY fixing there hasn’t been much in the way of notable headline flow. Equity trade sees the likes of the Hang Seng & the major Chinese indices trade heavily on the day, with focus on the negative COVID developments in HK & China (headlined by a 7-day lockdown in the tech hub of Shenzhen), even as Chinese state-owned media pointed to analyst comments flagging chances of PBoC easing. Elsewhere, there has been some worry surrounding Russia’s weekend attack on facilities in the west of Ukraine (not far from the Polish border), although wider market focus continues to fall on the hope for a diplomatic solution when it comes to the Ukraine-Russia conflict. The Antipodeans and the JPY find themselves at the bottom of the G10 FX table, with JPY struggling on the U.S. Tsy yield & e-mini uptick (USD/JPY has registered another fresh multi-month high in Tokyo trade), while AUD & NZD started to trade lower as cash Tsy yields picked up, before seeing fresh selling pressure on the Chinese equity weakness & PBoC CNY fixing dynamics.