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Yen Benefits From Risk Aversion, Kiwi Firms On Hawkish RBNZ Bets

FOREX

The yen swung from losses to gains as market sentiment turned sour, with Asia-Pac equity benchmarks retreating amid lingering angst surrounding the looming withdrawal of stimulus by the Fed. Spot USD/JPY lost altitude after charting a Doji candlestick on Tuesday.

  • The NZD caught a bid as participants added hawkish RBNZ bets, with money markets now pricing ~31bp worth of tightening come the end of the Feb MPC meeting. ANZ revised their RBNZ call, noting that they expect the OCR to peak at 3% in Apr '23 rather than at 2% in 2H2022 as inflation pressures remain. Rising milk prices may have lent some additional support to the kiwi after a strong GDT auction held on Tuesday.
  • The U.S. dollar lost shine and fared worse than most of its major peers, with the DXY slipping from a one week-high printed Tuesday. This helped spot USD/CNH edge lower, even as the PBOC pledged to use more monetary policy tools.
  • German, UK & Canadian inflation data, U.S. housing starts & building permits as well as comments from ECB's Holzmann & BoE officials take focus from here.

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