Forex Today: Dollar on the defensive with yields after US CPI-led blow, awaits PPI

Dhwani Mehta FXStreet

Here is what you need to know on Thursday, August 12:

The record-run on Wall Street failed to inspire the Asian traders, as the region’s indices trade in the red amid widening regulatory curbs from China and escalating tensions over the impact of the Delta covid variant on the economic growth. China released a five-year plan calling for greater business regulation as Beijing pursues a crackdown, per Bloomberg. The futures tied to the S&P 500 index also trade marginally lower on the day.

The American dollar remains on the back foot across the board, consolidating the US inflation-led drop while the Treasury yields also lick their wounds. Easing Fed’s tapering expectations and strong US bond auction knocked off the yields alongside the dollar on Wednesday.

Softening US Consumer Price Index (CPI) in July, especially the core figures supported the Fed’s view that inflation is transitory while reducing reduced concerns about an imminent pullback in the Fed’s monetary policy support.

Gold is looking to extend the previous rebound above $1750. WTI is sidelined around $69, preserving most of Wednesday’s advance after the White House said that it would not call on US producers to increase crude output.

Across the fx board, most majors are stuck in thin trading ranges amid the dollar’s downside consolidation, awaiting the US Producer Price Index (PPI) and Jobless Claims data for fresh trading impetus.

The Antipodeans remain on the backfoot, with AUD/USD bearing the brunt of covid lockdown extensions across Australia, currently trading in lows near 0.7360 while the Kiwi also flirts with lows around 0.7030, despite rising RBNZ Inflation Expectations. NZ PM Jacinda Ardern said the nation is simply not in a position to a full reopen just yet.

EUR/USD is holding the higher ground, looking to extend the recovery above 1.1750 while GBP/USD keeps its range below 1.3900 amid looming Brexit concerns and downbeat market mood, which weighs on the higher-yielding pound. Cable traders remain on the defensive ahead of the critical UK Q2 Preliminary GDP data. Also, of note remains the Kingdom’s Manufacturing and Trade figures.

Meanwhile, USD/JPY remains capped below 110.50 amid weaker Treasury yields. USD/CAD hovers around 1.2500, modestly flat on the day.

Cryptocurrencies remain in the red, with Bitcoin keeping its range around $45K. SEC Chair highlights crypto and DeFi trading platforms may be violating securities laws.

Like this article? Help us with some feedback by answering this survey:

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.