Dollar Recovery Continues, US 2yr Yield Near 5.0%

The firmer USD backdrop has extended. The BBDXY index last around 1250.35, up a further 0.10% in the first part of Wednesday dealings.

• We remain within recent ranges for the index, although USD strength has been evident against all of the G10 currencies and Asia FX.
• US equity futures sit lower, while regional equities are mostly lower, another USD support point. In the yield space, US cash Tsys are higher, with marginal outperformance at the front end, the 2yr yield back close to 5.0%.
• AUD/USD spiked to session highs of 0.6666 post stronger than expected monthly April CPI, but follow through was limited. We were last back near 0.6650, little changed for the session, although outperforming the likes of NZD and JPY.
• NZD/USD is off nearly 0.20%, last near 0.6130.
• USD/JPY has been supported on dips back to 157.20. The pair was last near 157.30 (earlier highs were at 157.40).
• Comments from BoJ board member Adachi hinted at a possible faster adjustment pace in policy settings if the weaker yen drives a quicker rebound in y/y inflation momentum. Still, Adachi stated policy settings needed to remain accommodative and that further policy adjustments were likely to be gradual.
• Looking ahead, the Fed’s Williams speaks and the Beige Book is published. In terms of data, US Richmond & Dallas Fed indices and German preliminary CPIs for May print.