Talking Points:

  • Aussie Dollar drops as bond sale hints at dovish shift in RBA bets
  • Yen falls as Japanese stocks rise, US Dollar corrects after selloff
  • Firmer risk appetite, sanguine Beige Book may boost Fed outlook

The Australian Dollar fell after a bond auction of 10-year notes saw yields declining even as demand cooled, hinting at dovish shift in investors’ RBA policy outlook. The average yield at the sale fell from 2.81 to 2.52 percent and the bid-to-cover ratio edged down from 3.55 to 3.24 compared with an offering of analogous paper in late March.

The Yen also fell as Japan’s benchmark Nikkei 225 stock index rose, putting pressure on the perennially anti-risk currency. The US Dollar traded broadly higher as prices digested after suffering the largest daily loss in a month in yesterday’s session. That came as risk aversion swept financial markets, pressuring Treasury bond yields lower and eroding confidence in the Fed’s wherewithal to continue tightening.

Looking ahead, a quiet day on the European economic calendar is likely to see investors looking ahead to the Fed Beige Book survey of regional economic conditions. A relatively sanguine tone may help push back against first-quarter slowdown fears, giving the greenback a lift as traders warm to idea of continued monetary stimulus withdrawal in the months ahead.

Improving sentiment may also help in this regard. Most European exchanges are edging up in early trade and S&P 500 futures are cautiously recovering, hinting that more of the same may be on offer once Wall Street comes online. Still, the fast-approaching first round of the French presidential election remains a potent source of concern and may yet sour investors’ mood.

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Asia Session

US Dollar May Recover on Firmer Risk Appetite, Fed Beige Book

European Session

US Dollar May Recover on Firmer Risk Appetite, Fed Beige Book

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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