Yen Outperforms On Continued Risk Aversion & Intervention Chatter

Demand for safe-haven assets coupled with renewed talk of potential FX intervention rendered JPY the best G10 performed for the second consecutive day, allowing USD/JPY to move further away from its recent 24-year highs.

• The region played catch up with comments from Fed Chair Powell, who told lawmakers Wednesday that engineering a soft landing for the economy would be "very challenging," adding that a recession is "certainly a possibility."
• Risk backdrop remained questionable in Asia, with U.S. e-mini futures staying in the red for the better part of the session (their brief recovery attempt failed) and crude oil trading on a heavier footing. This dynamic continued to support safer currencies, such as JPY, CHF and USD.
• Japan's former currency policy chief Nakao raised the prospect of an FX intervention, which prompted the yen to turn bid afresh. Bear in mind that Nakao's comments came with some caveats, as he called coordinated interventions "very difficult" and said he was not discussing these matters with current officials.
• The overnight drop in U.S. Tsy yields likely facilitated another downswing in USD/JPY, as relative yield dynamics remain a key focal point for the pair. Meanwhile, options traders added bearish USD/JPY bets, with 1-month risk reversal slipping to a fresh weekly low.
• Commodity-tied FX came under pressure, with the Aussie dollar pacing losses. AUD/USD fell below the $0.6900 mark but bears struggled to force a breach of yesterday's worst levels. Selling pressure materialised as BBG Commodity Index plunged to its lowest point since Mar 29.
• Today's data highlights include a suite of PMI readings from across the world as well as U.S. jobless claims. Fed Chair Powell will testify on the Hill, while ECB's Nagel & Villeroy are set to deliver speeches. Norges Bank will announce its rate decision.