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USD Gains On Lingering Virus Worry, PBOC Signals Discomfort W/Yuan Strength

FOREX

The greenback outperformed its G10 peers in muted Asia-Pac trade, albeit by very narrow margins. The DXY advanced off a one-month low, after the 50-DMA crossed above the 100-DMA. Familiar themes continued to weigh on broader sentiment, with several deteriorating Covid-19 outbreaks across Asia stealing the limelight.

  • USD/JPY eased off in early trade alongside U.S. e-minis, but erased losses ahead of the Tokyo fix. The fact that it was a Gotobi day in Japan may have helped fuel recovery. The yen paid little attention to domestic economic data, which were generally better than expected.
  • USD/CNH crept higher as the PBOC set their central USD/CNY mid-point at CNY6.4602, 24 pips above sell-side estimate. Today's fixing represented the biggest positive miss since June 17, which some interpreted as a sign that China's central bank would prefer to see a weaker yuan. That said, USD/CNH failed to cling onto its post-fix gains and erased them later on.
  • European flash GDP prints will hit the wires before flash Eurozone CPI. Canada will also provide an update on its GDP, while the U.S. docket is headlined by core PCE, MNI Chicago PMI & final U. of Mich Sentiment. Fed's Bullard is set to speak today.

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