US Dollar Rally Pauses as Japanese Yen Finds Respite: Asia-Pacific Outlook

US Dollar, DXY, Asia-Pacific, Japanese Yen, Australian PMI, Technical Outlook – Talking Points

• Asia-Pacific markets face a risk-off open on Friday after US stocks fall
• Australian PMI data points to modest recovery as AUD/USD gains
• DXY Index stalls at trendline resistance just shy of the June 2002 high

Friday’s Asia-Pacific Outlook

Asia-Pacific markets look set to extend Thursday’s risk-off tone today after US stock indexes fell in New York. The 10-year Treasury yield hit its highest level since February 2011 after rising 18 basis points. The Nasdaq-100 Index (NDX) fell 1.17%, bringing prices within 4% from its 2022 low at 11,037.21. Gold was little changed, WTI crude oil climbed 0.66% and wheat prices rose for a third day in Chicago.

The US Dollar DXY Index hit a fresh multi-decade high before trimming its gains to trade little changed over the past 24 hours. The Japanese Yen weighed on the DXY Index and rose against its major peers, benefiting from an intervention by the Ministry of Finance. Masato Kanda, Japan’s chief currency official, confirmed Tokyo’s intervention a few hours after the Yen weakened on the Bank of Japan’s policy announcement that kept its super-loose policy in place. Prime Minister Fumio Kishida, on Thursday, said that on October 11, Japan would abandon its daily arrival cap and permit visa-free travelers to enter the country.

A disappointing 12.5-bps hike from Taiwan’s central bank sent USD/TWD to a fresh 2022 high. In a divided vote, the Bank of England hiked by 50 basis points. The British Pound fell against the Greenback. The South African Reserve Bank (SARB) hiked its main repo rate by 75 basis points to 6.25% on Thursday. The South African Rand fell against the USD, although USD/ZAR’s bullish trend remains intact. USD/CHF surged over 1% after the Swiss National Bank (SNB) brought rates into positive territory by hiking its rate to 0.5%.

A September update for Australia’s services and manufacturing purchasing managers’ indexes (PMI) crossed the wires this morning. The manufacturing gauge rose to 53.9 from 53.8 in August, and the services index increased to 50.4 from 50.2, according to the S&P Global data. The Australian Dollar rose modestly against the US Dollar and New Zealand Dollar overnight, as traders bet on a 50-bps rate hike at the next RBA meeting.

September 23 – Notable APAC Events

Taiwan – Consumer Confidence (SEPT)

Philippines – Budget Balance (AUG)

Thailand – Balance of Trade (AUG)

Singapore – Core Inflation Rate YoY (AUG)

US Dollar Technical Analysis

The DXY is at a key trendline from the May low, which has served as support and resistance since then. Prices are struggling to break above the trendline as the June 2002 high approaches, which is within 1% of the current level. The Relative Strength Index (RSI) fell at the 70 level, keeping the oscillator in neutral territory. A pullback would see potential support at the 20-day Simple Moving Average (SMA).

US Dollar (DXY Index) – Daily Chart

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

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