NZD & AUD Outperform JPY On Firmer HK/China Equities

The BBDXY sits lower, last under 1242, with NZD and AUD outperforming amid a strong rally in Hong Kong and China equities.

• The equity rally was led by tech and property names in Hong Kong and China. The rest of the region has seen more mixed equity sentiment, while US futures sit down modestly.
• US yields sit down modestly, continuing the theme from Tuesday trade. Front end 2yr yields are down by 2bps to 4.59%, as the FOMC Minutes print later.
• NZD has had a slightly stronger beta to the HK/China equity risk on move. NZD/USD sits up 0.35%, last near 0.6190. This is very close to Tuesday highs, although we haven't been able to breach this level yet.
• AUD/USD has rallied 0.30% to 0.6565/70. At the margin, the weakness in iron ore prices may be curbing gains, although the Singapore benchmark is back to $122.5/ton today. The AUD/NZD cross is not too far from the 1.0600 level (last near 1.0615).
• Earlier data showed Q4 AU wages close to expectations. We were +4.2% in y/y terms, the fastest pace in almost 15 years. The RBA is currently not concerned re wages but that depends on productivity improving. It stated that productivity not recovering “as assumed” was a “material risk”. Without that growth, current wage rates are too high to achieve the inflation target.
• USD/JPY has tracked narrow ranges, last near 150.00, little changed for the session. We may be seeing some underperformance relative to AUD and NZD, given HK/China equity gains.
• Looking ahead, the Fed’s Bostic, Collins and Barkin speak plus the January Fed meeting minutes are published. The ECB’s Tuominen and Fernandez-Bollo, Bundesbank’s Nagel and BoE’s Dhingra make appearances.