FOREX: Safe Havens Underperform Amid Equity Gains/Higher US Yields

There has been a modest risk on tone in G10 FX in the first part of Thursday trade. Both yen and CHF are down marginally against the USD, while AUD and NZD have ticked higher. The better equity tone, led by the tech sector, has been a standout so far today. The BBDXY USD index is little changed, last near 1235.50.

• USD/JPY has had a range of 142.23-142.95 so far today. We pushed higher in early trade amid a tick up in US yields, led by the front end. Also weighing at the margins was a slightly weaker than expected August PPI print. However, hawkish rhetoric from BoJ board member Tamura that the central bank needs to raise rates to at least a neutral rate of 1% spurred a USD/JPY turn around.
• This afternoon, with US yields holding positive, led by the front end, coupled with higher US equity futures and strong regional equity gains has supported FX risk appetite USD/JPY was last near 142.80, off 0.30% for the session. CHF has slipped around 0.10%.
• AUD and NZD are both up around 0.20% versus the USD. AUD/USD ticking up to 0.6690, with consumer inflation expectations data proving sticky. AUD/JPY is up, back near 95.50. Recent lows were at 93.59.
• NZD/USD has firmed back to 0.6150. Earlier data suggested Q3 average inflation rates are signalling a return to the RBNZ's target. This may have aided higher AUD/NZD levels at the margin (hitting highs of 1.0893), but we sit slightly lower in latest dealings.
• Helping the A$ at the margins is a further pick in metal prices, with iron ore back near $94/ton, while copper is also up.
• Later US August PPI, budget and jobless claims print. Core PPI is expected to hold steady at 2.4% y/y. The ECB announces its decision today, which will be accompanied by updated staff forecasts and a press conference. It is expected to cut rates 25bp.