USD Higher As Risk Aversion Grips Asia Pac Markets

The BBDXY index has spent most of the Asia Pac session on the front foot. We are comfortably above Thursday session highs, last in the 1229.40/50 region, +0.25% for the session and back to mid June levels.

• Dollar support has been evident in the cross asset space, with equities weaker throughout the region and in terms of US futures (Emini last 4406, -0.40%). The weakness in HK markets, which returned today after yesterday's holiday has been evident. The HSI off nearly 2%, while the China Enterprise Index is down a little over 2%. China markets remain closed until Monday.
• US yields have ticked down but this hasn't weighed on USD sentiment, although JPY is clearly outperforming the rest of the G10. Expectations that global core yields may have to go higher to tame inflation appears to be weighing on broader risk appetite today.
• USD/JPY dips sub 143.00 have been supported, the pair last near 143.10/15. Core CPI was stronger than expected for May, but didn't produce meaningful yen strength. We haven't heard any fresh rhetoric from the authorities today re yen weakness.
• AUD/USD is the weakest performer, down 0.70% and not far off 0.6700, which is around the 50-day EMA. In addition, to the headwinds outlined above, commodities are lower as well, with copper, iron ore, and oil all down.
• NZD/USD is weaker as well, although outperforming the AUD, the pair last just under 0.6150. NOK is down nearly 0.80%, last under 10.7, unwinding some of Thursday's outperformance, albeit with liquidity light in Asia Pac hours.
• Looking ahead, we have UK retail sales coming up, then EU and UK PMIs. In the US session, Fed speak from Bullard, Bostic and Mester is due, along with PMIs.