The moves in US treasuries came despite no major economic releases in the US. AUD/USD experienced a relatively sharp drop after having traded as high as 0.9233 in Asia yesterday. The pair is now back at 0.9117 heading into the monetary policy meeting minutes. Perhaps some of the short term bulls are nervous about a renewed easing bias from the statement. There is quite a bit of support in the 0.91 region and we feel this might continue to hold in the near term.
USD/JPY also experienced some volatility, with an initial spike to 98.13 which was greeted by sellers and resulted in a reversal to 97.47. The pair is currently trending sideways at 97.71 with no major economic releases to look out for from Japan today. More volatility is likely from the USD side of the equation as the moves in US treasuries and tapering expectations remain in focus.
EUR/USD rallied to 1.338 after the Bundesbank suggested that forward guidance from the ECB for an extended period of low interest rates wasn't set in stone and was by no means a guarantee. However, the move higher was short lived as the pair retreated into 1.333 where it remains relatively sidelined.
There were even bigger moves in emerging market FX pairs, with sharp falls in high yielding currencies such as the INR, MXN, BRL and ZAR against the greenback. There is nothing much on the wires to drive risk today but the action starts tomorrow when we get China’s FDI and CB leading index data.