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The US Dollar lost ground against most of its G10 FX counterparts as the Senate’s version of a tax cut proposal underwhelmed, undermining the case for inflationary fiscal policy pushing the Fed into a steeper rate hike cycle. The New Zealand Dollar proved weakest on the day however, trading broadly lower after RBNZ Assistant Governor John McDermott said the central bank is in no rush to raise rates.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: Aussie Dollar Volatility Unlikely on RBA Statement

The RBA statement on monetary policy headlines an otherwise quiet economic calendar in Asia Pacific trading hours. The document rarely strays from what appears in official policy statements, and given the firm wait-and-see bias in this week’s announcement, it seems likely that this too will pass without making too much of a splash.

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Asia AM Digest: Aussie Dollar Volatility Unlikely on RBA Statement

IG Client Sentiment Index Chart of the Day: USD/JPY

Asia AM Digest: Aussie Dollar Volatility Unlikely on RBA Statement

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Retail trader data shows 47.9% of traders are net-long USD/JPY, with the ratio of traders short to long at 1.09 to 1. The number of traders net-long is 2.2% lower than yesterday and 2.4% higher from last week, while the number of traders net-short is 11.3% lower than yesterday and 14.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

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