Dollar Index Down As Yen Rallies On Supportive Cross Asset Backdrop

The USD BBDXY sits lower, largely thanks to a firmer yen backdrop so far in Tuesday trade. The index last under 1254, off 0.10%. Yen gains have been prominent, particularly commodity related FX like NZD and AUD.

• USD/JPY has steadily pushed down through Asia Pac trade, the pair last near 156.25/30, up around 0.50%, and just under intra-session lows from Monday. 155.38, the July 18 low is the next potential downside target.
• Cross asset trends are supporting the yen, with US equity futures lower, while some regional equity markets are struggling as well, most notably China (CSI 300 off 1%), which is likely weighing on higher beta FX against the yen.
• AUD/JPY is back to 103.65, while NZD/JPY is around 93.25/30, with both pairs around session lows. For NZD/JPY we were last near these levels in the first half of May. NZD/USD is back under 0.5970, AUD.USD at 0.6635.
• In the yield space, US Tsy yields have ticked down, 0.7-1.9bps, another support point for the yen. Combined with a slightly firmer JGB yield backdrop has helped push yields differential with the US down a touch.
• Commodity markets are mostly weaker, with focus on the metals space. Cooper (CMX basis) is down modestly while Iron ore is over 2%. China growth concerns/supply are driving sentiment in this space.
• Looking ahead we have another light session data wise, with just the US Richmond Fed index, and existing home sales. The ECB's Lane also speaks.