USD Reverses Earlier Losses, Weaker CNH/Equity Losses Hurt Risk Currencies

Early USD softness (post the news US President Biden is dropping out of the election race), has given way to a more supportive backdrop as the Asia Pac session unfolds.

• The BBDXY USD index was last 1256, unwinding most of the earlier losses. USD/CNH has risen above 7.2900, following the 10bps cut to the 7-day reverse repo, and both the 1yr and 5yr LPRs. The LPRs were expected to be held steady, although these forecasts were made prior to the repo news.
• These moves are designed to support the economy and comes after disappointing data last week and the Third Plenum meeting.
• It isn't doing much for local equity sentiment at this stage though, with China and Hong Kong markets lower. Market concerns around growth continue in the near term.
• The MSCI Asia Pac index is also down 1%, with broad based regional losses adding to the risk off tone.
• AUD/USD is the weakest G10 performer, off 0.20% to 0.6670. NZD/USD is also tracking lower, off 0.10%, back to 0.6000. Moves are more muted elsewhere, USD/JPY slightly higher to 157.55/60.
• US equity futures are off earlier highs as well, albeit still in positive territory. US Tsy futures are off earlier highs well, both USD support points at the margin.