From Marc Chandler at Bannockburn Global Forex:
Overview: The dollar is mostly consolidating yesterday's CPI-inspired decline. The main features include the market bidding the US dollar back above JPY159 despite more speculation that the BOJ did in fact intervene yesterday and checked on the euro-yen cross in the local session today, and unexpectedly soft Swedish inflation, which the swaps market says could spur three rate cuts here in second half. A record trade surplus and strong aggregate lending figures did not prevent the offshore yuan paring yesterday's gains. Sterling is pushing to new highs for the year above $1.2950, while the euro holds in a narrow range below $1.0890. Most emerging market currencies are firmer, with the notable exception of Taiwan, South Korea, and Türkiye.
The rebound in the yen appeared to weigh on Japanese stocks, where the Nikkei tumbled nearly 2.5%, its largest loss in nearly three months. The biggest drop in the NASDAQ since late April took a toll on Taiwan and South Korean equities, where the main index fell nearly 2% and 1.2%, respectively. Mainland shares that trade in Hong Kong jumped 2.5% while the CSI 300 eked out a small gain. Less-tech-intensive, Europe's Stoxx 600 is up a little more than a quarter of a percent, for what could be the third consecutive advance, the longest in more than a month. US index futures are narrowly mixed, ahead of the US PPI. Asia Pacific bonds played catch up after strong US rally yesterday, while European yields are 3-5 bp higher, except in Sweden after its CPI report. UK Gilts have been hit the hardest and the 10-year yield is up a little more than seven basis points. The 10-year US Treasury yield fell seven basis points yesterday to about 4.21% and is now a little more than a single basis point higher. Gold surged through $2400 yesterday to almost $2425 is softer today and testing the $2400 area from above. September WTI is at a four-day high above $82. Monday's high was $82.50.Asia Pacific
The market is trying to figure out if the BOJ intervened after yesterday's soft US CPI. A Japanese TV claimed intervention took place, citing one unnamed person. A newspaper cited an unnamed government official, and earlier today, the press reported BOJ checked on the euro-yen cross. Still, we will not know for sure until the end of the month but there may be some indication by early next week. We think in both word and deed, Japan does not appear to be defending a level. Instead, broadly understood, there are three criteria: one-way market, volatile market, or one that is not responding as it should to fundamental developments. None of those conditions existed yesterday, which would seem to make a high bar for Japan intervention during US hours....
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