FOREX: USD Recovers Some Ground, Aided By Higher Tsy Yields
The USD BBDXY index has tracked higher as the Wednesday Asia Pac session has unfolded but remains within recent ranges. The index was last 1286.8, up a little over 0.15% versus end Tuesday levels in US.
- There has been some focus on US Tsy yields, with moves of +2-3bps firmer across the benchmarks. We opened a little weaker, with the 10yr getting close to 4.28%, but it is now around 4.32%.
- Impetus for the yield move appeared to come from the passage of the budget blueprint by the US House. "The House budget would pave the way for $4.5 trillion in tax cuts — about enough to pay for extending the expiring cuts but not enough to also cover Trump’s campaign promises for additional tax relief." (per BBG).
- USD/JPY got to lows of 148.63 in early dealings, but now sits back in the 149.50/55 region, around 0.30% weaker in yen terms. EUR/USD is back close to 1.0500.
- AUD/USD has drifted down to be under 0.6330, off by a similar amount to yen. The Jan CPI came and went without much FX market impact. The headline eased, but core ticked up. We will get more information at the second month print of the quarter (for Feb), as this will include more services inflation updates. NZD/USD is off by a similar amount to AUD, last at 0.5710/15.
- US equity futures are higher, up by 0.30-0.40%. Hong Kong markets are also much higher, but this hasn't aided higher beta FX much. Note early tomorrow morning Asia Pac time get Nvidia earnings.
- Looking ahead, EU data is second tier, but we do have some ECB speak, including Lagarde. In the US, new homes data prints, along with Fed speak from Barkin and Bostic.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
ASIA: Asian Currencies Mixed As Tariffs and Holiday’s Dominate.
- Asian currencies were mixed with Korea and Indonesia out and Chinese Lunar New Year holidays about to begin.
- With headlines that the President was being charged, and the tech sector challenged by DeepSeek, the won had a tough day losing -0.453%.
- Malaysia’s Ringgitt continued its period of lower volatility relative to regional peers, rising +0.073%.
- They Yen followed suit as investors begin to embrace the idea of higher rates. The Yen gained +0.07%.
- China’s USD/CNY fixing printed at 7.1698 versus a Bloomberg consensus of 7.2451.
BONDS: NZGBS: Richer With US Tsys, Trump Tariffs In Focus
NZGBs closed 2bps richer, aligning with strengthening in cash US tsys in today’s Asia-Pac session.
- Cash US tsys are dealing 1-4bps richer in today’s Asia-Pac session, with a flattening bias, after finishing Friday mildly stronger.
- US stock futures are dealing lower ahead of key earnings week, with the S&P 500 down 0.8% and the Nasdaq down ~0.50%.
- “In a social media post on Sunday, Trump said he ordered an emergency 25% tariff on all Colombian goods coming into the US, which will be raised to 50% in a week. Oil, gold, coffee and flowers top the list of exports, according to Colombia’s tax authorities.” (per BBG)
- The US Treasury will auction $69 billion of two-year notes and $70 billion of five-year debt later Monday.
- Focus this week is the FOMC policy announcement on Wednesday.
- Swap rates closed 2bps lower after a subdued session given Auckland Anniversary and Australia Day holidays.
- RBNZ dated OIS pricing closed little changed. 47bps of easing is priced for February, with a cumulative 109bps by November 2025.
- Tomorrow, the local calendar will see Filled Jobs.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-36 bond and NZ$100mn of the 1.75% May-41 bond.
CHINA: Futures Jump as Industrial Profit Decline Continues. (Corrected)
{CH} China:
• The PBOC conducted its daily OMO this morning injecting CNY175bn ahead of the Lunar New Year break, just as China data showed that decline in Industrial Profits is now into it’s third year with a decline of -3.3% for December.
• The benchmark 10YR future jumped +0.365 in this morning’s trade to be at 109.405.
• Having edged towards the 20-day EMA last week, today’s moves sees the contract break out above all major technical levels with key levels being 20-day EMA 109.05, 50-day EMA 108.40, 100-day EMA 107.55 and 200-day EMA 106.60.
• China’s 5YR future jumped +0.295 and the 2YR future jumped +0.142.
• The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive and it is likely that the Central Bank will provide liquidity leading into the holiday period which could see the resumption of the upward trend.
