Taiwan Jitters Add Fuel To JPY Rally

Reports surrounding U.S. House Speaker Pelosi's expected visit to Taiwan continue to do the rounds, causing anxiety over a potential escalation in Sino-U.S. tensions. She is expected to arrive in Taipei after 10pm local time, with Beijing threatening unspecified military response.

• Spot USD/CNH has left CNH6.7900 in rear-view mirror on its way to best levels since May 17. Redback weakness is likely weighing on broader sentiment across the Asia-Pac region.
• Geopolitical angst generates demand for safety, resulting in fresh yen purchases, making the currency best G10 performer for the fourth consecutive day.
• USD/JPY is testing the Y131.00 figure, bottoming out just shy of there. Tsy richening contributes to the move, promoting further narrowing in U.S. yield gap with Japan.
• From a technical standpoint, worth flagging that USD/JPY has tumbled past Jul 16 low/61.8% retracement of its May - Jul advance at Y131.50/34.
• Regional risk barometer AUD/JPY trying to make a convincing break below Y92.00 as we type, as high-beta currencies lag behind.
• The RBA will announce its monetary policy decision later today, with the overwhelming consensus looking for a 50bp hike.
• Central bank speaker slate features Fed's Evans, Mester & Bullard.