USD Lures Participants With Risk Appetite Damped By China's Commitment To COVID Zero

Risk aversion took hold as China's National Health Commission vowed to "unswervingly" stick to the COVID Zero Strategy, pushing back against re-opening speculation from last week. Spot USD/CNH traded on a firmer footing as the greenback outperformed. The BBDXY index added 0.2% as U.S. Tsy yield curve twist flattened.

• The PBOC paused a streak of stronger-than-expected USD/CNY mid-point fixings after a nearly 2% drop in USD/CNH last Friday. The pair's reaction to the re-introduction of weakening bias into the fixing for the first time since late August was limited, with the redback already pressured by COVID Zero musings.
• The Antipodeans led the high-beta FX bloc lower on a negative lead from China, even as the aggregate BBG Commodity Index lodged some marginal gains, breaking above its 100-DMA. AUD/NZD see-sawed, having a look above Friday's high in the process, before stabilising near neutral levels.
• The yen lagged its safe haven peers USD and CHF, with U.S./Japan 2-year yield differential widening 1.8bp. Spot USD/JPY returned above the Y147 mark, with local media flagging continued political headwinds for PM Kishida's government.
• Focus turns to German & Norwegian industrial output figures, as well as comments from Fed's Collins & Barkin, ECB's Lagarde & Panetta.