Greenback Sags Amid Positive Risk Tone, Aussie Trims Gains Post-RBA

The BBDXY dropped back towards the 1,330 level, roughly halving yesterday's advance, with U.S. Tsy yields easing across the curve. Pre-FOMC musings took centre stage, albeit another 75bp rate hike remains fully priced for this week's monetary policy review.

• Greenback underperformance was accentuated by the broader risk-on tone, which saw major safe haven currencies (JPY & CHF) trade on the back foot. E-mini futures crept higher, with the three main contracts last 0.32%-0.35% higher on the day, while strong performance from Hong Kong tech shares supported equity sentiment.
• The Aussie dollar pulled back from highs as the RBA raised the cash rate target by the expected 25bp, disappointing observers with more hawkish leanings (32bp of tightening was priced into dated OIS pre-decision). The central bank lowered its GDP outlook, while revising its CPI forecast higher.
• Post-RBA impetus helped AUD/NZD stage a clean breach of its 200-DMA, which provided support over the past 10 months. The spot rate sank in tandem with Australia/New Zealand 2-year swap spread amid the RBNZ's relatively hawkish posture. The kiwi tops the G10 scoreboard, leading the commodity-tied FX bloc higher.
• Offshore yuan weakened after the PBOC set the USD/CNY mid-point at a new cyclical high going back to early 2008, but recovered thereafter amid broad-based USD weakness. China's Caixin M'fing PMI rose to 49.2 last month, beating the consensus forecast of 48.5.
• A slew of manufacturing PMI readings from across the globe take focus from here. Speeches are due from RBA's Lowe, BoC's Macklem & Riksbank's Ingves.