Greenback Loses Shine, Yen Finds Poise

News flow quietened towards the end of the week in Asia, with participants watching mild oscillations in risk appetite. While widening partial lockdown measures in Shanghai provided a source of worry, China's latest inflation figures revived sentiment. Headline CPI coming in at +2.1% Y/Y vs. +2.2% expected and an in-line deceleration in factory-gate price growth suggested that price pressures are moderating, opening some scope for the PBOC to ease policy, even if there have been no concrete announcements on that front as of yet.

• The yen eked out some gains and USD/JPY is on track to snap a five-day winning streak. Technical conditions for the pair remain overbought, with the RSI still above 70. USD/JPY 1-month risk reversal extended its pullback from a one-month high printed earlier this week. FinMin Suzuki stuck to his usual lines on the yen, vowing to watch FX moves with urgency and stressing the importance of yen stability, without citing any specific levels.
• The greenback faltered against all of its G10 peers, even as Tsy yields edged higher, ahead of the key U.S. CPI report which is expected to show that the rate of consumer price growth topped 8%. Despite trimming some gains today, the U.S. dollar remains the best G10 performer this week.
• The Aussie dollar struggled for any topside impetus, diverging from its Antipodean cousin, with AUD/NZD moving sub-NZ$1.1100. Back-end yield spreads continued to move against AUD relative to NZD, but we have seen stability at the 2-year tenor.
• With China inflation data already out, focus turns to the closely watched update on U.S. consumer prices. Also on tap are flash U.S. Uni. of Mich. Sentiment & Canadian unemployment as well as comments from ECB's Villeroy, Holzmann & Nagel.