Yen Turns Tail As Risk Regains Poise

Risk sentiment found poise towards the end of the week in Asia as U.S. e-mini futures crept higher. Headline flow offered little to add to the familiar narrative, leaving participants to reflect on familiar dynamics. Some positivity may have been linked to reassuring comments from Shanghai authorities on the local COVID-19 outbreak, as they expected to achieve zero community transmission in mid-May.

• The yen went offered amid reduced appetite for safe haven assets. Japan's economic officials reiterated their usual comments. FinMin Suzuki pointed to two-way impact of a weaker yen and noted that the government is watching the FX market closely, while BoJ Gov Kuroda stressed the importance of FX stability but also backed continued powerful monetary easing.
• Firmer crude oil prices lent support to commodity-tied currencies. The Aussie dollar paced gains in the space, despite the absence of notable domestic catalysts.
• The PBOC extended a streak of firmer than expected yuan fixings to nine days, while the deviation from the expected level widened to 69 pips. Offshore yuan showed little in the way of immediate reaction to the fixing and rose to a fresh cycle high of CNH6.8380, before reversing gains later in the session.
• The HKMA stepped up HKD purchases in defence of its currency peg, bringing their total value to HKD6.947bn.
• The flash reading of U.S. Uni. of Mich. Sentiment, Norwegian GDP, EZ industrial output & final French CPI take focus on the data front today. Comments are due from Fed's Mester & Kashkari as well as ECB's Guindos, Centeno, Nagel & Schnabel.