Yen Gives Ground On Crosses

The USD BBDXY is slightly weaker in the first part of trading, last around 1223.85. Overall trading conditions have seen a fairly muted start to the week. Focus remains on USD/JPY, which has firmed a touch, back through 128.00. Other pairs are mostly higher against the USD, leaving the yen weaker on a cross basis

• USD/JPY saw lows just under 127.70 in the early part of the session, but has tracked back above 128.00 (high of 128.17) before some selling interest emerged. Japan yields are down slightly, as focus shifts to BoJ purchase operations today. The Dec PPI came in stronger than expected +10.2% y/y (9.5% forecast), but hasn't impacted sentiment.
• AUD/USD is on the front foot, last around the 0.6985/90 level (+0.30%). Highs from Friday came in close to 0.6995. Sentiment hasn't been dented by China efforts to reduce speculation in the iron ore space (last at $120.60/ton, versus recent highs above $126/ton). AUD/JPY is back above 89.50.
• NZD/USD is very close to the 0.6400 handle, and outperforming slightly (+0.38%). Moves towards 0.6420 drew selling interest last week.
• Both AUD and NZD are outperforming most other G10 currencies, although NOK and SEK are moving in line, with both currencies around 0.30% firmer.
• US equity futures are down a touch, but away from worst levels. There is no cash US Tsy trading today due to the US MLK holiday.
• Coming up the China 1yr MLF decision is out.