Market Sentiment Sours As FOMC Minutes Send Reverberations Through Asia

Risk appetite turned sour as the Asia-Pacific woke up to the relatively hawkish FOMC minutes released Wednesday, which fuelled expectations of an earlier, faster policy tightening by the Fed. The defensive feel was reflected in price action across G10 FX space.

• Risk aversion was a boon for the yen which topped the G10 pile. USD/JPY moved away from a cycle high printed on Tuesday. Reports suggesting that the BoJ might raise their FY2022 inflation outlook at their monetary policy meeting this month were doing the rounds, while BBG noted that policymakers could debate ditching the view that price risks are skewed downward.
• The Antipodeans led commodity-tied currencies lower, with both AUD/USD and NZD/USD printing two-week lows. Weaker oil prices added pressure to the space.
• China's services sector unexpectedly expanded at a faster pace in December, according to the latest Caixin PMI report, but the yuan was unfazed. Broader USD strength drove spot USD/CNH above its 50-DMA.
• On the data front, focus turns to German factory orders as well as U.S. ISM Services, trade balance & weekly jobless claims. Speeches are due from Fed's Bullard & Daly.