Positive Risk Tone Dents Yen, PBOC Signals Discomfort With Yuan Strength

Risk tone in G10 FX space remained positive after strong corporate earnings reports boosted benchmark stock indices on Wall Street, while U.S. Tsy yields extended gains in early Tokyo trade. Buoyant sentiment reduced demand for safe haven currencies and conspired with Gotobi day flows against the yen, making it the worst G10 performer.

• USD/JPY rallied through Oct 4, 2018 high of Y114.55 and topped out at Y114.70, its best level since Nov 6, 2017. The cross then went offered into the Tokyo fix, trimming gains as a result. The pair's RSI moved deeper into overbought territory.
• The yuan faltered as focus turned to PBOC action and domestic data. China's central bank boosted its daily liquidity injection to net CNY90bn and set its central USD/CNY mid-point 27 pips above sell-side estimate, signalling a sense of discomfort with the redback's sharp appreciation yesterday. Meanwhile, China's new home prices registered the first monthly contraction since 2015, fuelling concerns about the systemically important local property sector.
• The Antipodeans edged away from session highs as participants assessed developments in China, yet they remained atop the G10 pile. NZD and AUD showed at their best levels against the greenback in four and three months respectively.
• Inflation reports from the EZ, UK & Canada headline today's global data docket. Central bank speaker slate is tightly packed again and features a number of Fed, ECB, Norges Bank & Riksbank members.