Safe-Haven FX In Demand, Cautious Risk Tone Dominates

The Asia-Pac session witnessed a flight to safety as Chinese tech shares dropped, while participants scrutinised the latest comments from U.S. central bankers/U.S. economic data for clues about Fed tightening outlook.

• The release of above-forecast retail sales data and signs of continued determination among Fed members to keep raising interest rates may have pushed U.S. Tsy yields higher in Asia hours, even as Fed Governor Waller said he feels "more comfortable" about slowing the pace of rate hikes.
• Higher U.S. Tsy yields generated greenback outperformance. The BBDXY index crept higher but the 1,280 level provided firm resistance.
• USD/JPY oscillated between gains and losses, holding a familiar range through the session. North Korea test-fired a ballistic missile in a reminder of the region's worrying geopolitical situation.
• A slightly softer commodity complex weighed on high-beta FX bloc, with the Antipodeans underperforming in the Asia-Pac timezone.
• The Aussie dollar showed a limited reaction to the domestic labour market report. Employment grew faster than forecast, which underpinned a surprise downtick in the unemployment rate, with participation steady versus its revised prior level.
• Data highlights today include U.S. jobless claims, housing starts, building permits & Philly Fed Survey, as well as final EZ CPI. Comments are due from Fed's Bullard, Bowman, Mester, Jefferson & Kashkari, BoE's Pill & Tenreyro, as well as ECB's Villeroy.