Risk Off/Intervention Fears Drive Yen Outperformance

The BBDXY USD index sits off session highs, last just under 1256.10, largely thanks to a modest yen rebound.

• A risk off tone has been evident in the G10 FX space today. US equity futures sit lower, by -0.55% to -0.65%, while all the key regional equity markets are weaker as well.
• A firmer core yield backdrop has weighed on equity sentiment in recent sessions. US cash Tsy yields sit close to unchanged so far today though.
• USD/JPY sits near 157.20 in recent dealings, a yen gain of 0.30% and around session lows. The equity risk off tone is helping outperformance on crosses, with NZD/JPY down around 0.50% at this stage. Late Wednesday highs in USD/JPY came close to suspected intervention levels earlier in the month, so this may have encouraged some trimming of long USD/JPY positions as well.
• NZD/USD is back close to 0.6100, down around 0.20%.
• The NZ budget hasn't impacted FX sentiment, with focus likely to rest on whether announced tax cuts make the RBNZ inflation outlook more challenging.
• AUD/USD is close to unchanged, last around 0.6605/10. Private Capex for Q1 rose 1.0%, slightly above expectations.
• Later the Fed’s Williams and Logan speak. In terms of data, there are revised US Q1 GDP, April trade and jobless claims plus Spain’s May CPI and European Commission May survey.