JPY Weakens As Yields Rebound, A$ Lower Post RBA

The USD DXY index is holding comfortably above 105, largely thanks to higher USD/JPY levels as yields rebound. AUD/USD has fallen post the RBA statement, while most other currencies are slightly firmer against the USD.

• USD/JPY has been supported by a rebound in US Cash Tsy yields, as these markets re-opened, with the 2yr back up to 2.94%, nearly +11bps on the day. This follows a strong bounce overnight in EU markets. USD/JPY reached close to 136.40, but is back to 136.25, +0.45% for the session.
• The RBA raised the cash rate by 50bps to 1.35%, as widely expected. AUD/USD dipped post the RBA announcement as the central bank sounded more cautious on the outlook and removed a reference to rates being low in the accompanying statement. We dipped to the low 0.6850 region before sentiment stabilized. Earlier highs were at 0.6895.
• Elsewhere, much of the focus has been US-China talks and the potential for tariff relief, although nothing concrete has emerged yet. China equities couldn't rise though, despite this news and a strong upside beat on the China Caixin services PMI (54.5 versus 49.6 expected). USD/CNH has remained range bound, last at 6.6925.
• US equity futures are tracking higher, although are well down on earlier session highs. This has helped JPY underperform at the margin, particularly on a cross basis.
• Other pairs are sticking to recent ranges. EUR/USD is holding above 1.0430, while NZD/USD is around 0.6210, largely ignoring a poor Q2 NZIER business survey.