The US dollar's reaction to the news was fairly muted. In Asian trading, the greenback continued yesterday's decline and traded within a narrow range of 104.5-104.8. The fact is that yesterday's CPI data was just the beginning of a series of reports. Today, the US will release reports on producer prices and retail sales.

Tomorrow, markets expect import prices and industrial production reports. Therefore, the US currency was quite restrained against its G6 basket counterparts at the beginning of Thursday. It was trading near 104.7, taking into account the next reports from the US.

The Japanese yen was able to regain most of its lost positions as the US dollar was gradually sliding down in Asian trading. Early Thursday, the yen moved along the level of 147.3, the same level as at the beginning of the week.

On Monday, the yen strengthened significantly against the greenback after the hawkish comments of the head of the Bank of Japan. A few days ago, Kazuo Ueda hinted that the regulator may move from negative short-term interest rates to more aggressive settings.

However, the Japanese business does not share the optimism of the central bank governor that the economy is improving. In Japan, the sentiment index for manufacturers sharply dropped to four points from a yearly high of 12 points.
Japanese firms complained about elevated input costs of raw materials, weak foreign and domestic demand, heightened US-China tensions, geopolitical risks, and global economic uncertainty.
Indeed, the same factors could be cited by companies in any other country. However, the main reason for the decline of Japanese business is the weak national currency amid the Bank of Japan's ultra-loose monetary policy.
That is why the markets were excited to hear that the regulator may change its dovish monetary policy. This factor is key for the Japanese currency at the moment. Supported by speculation of higher interest rates, the yen is strengthening.

During the Asian trading session, the dollar/yen pair was in the bearish territory between the support of 147.0 and the resistance of 147.5. It seems that the yen's quotes are unlikely to change significantly in the near future. Meanwhile, the gap between the key rates of the US and Japanese regulators remains significant.

At the same time, the gap may widen. The Fed is likely to make one more rate hike this year in November or December. This move may prevent the US dollar from a large sell-off and help limit its losses against the yen.

The Australian dollar also benefited from the temporary weakness of the greenback. As a commodity currency, the aussie was supported by the surge in oil prices. Even the weak yuan rebounded today as Beijing suggested that some major Chinese banks refrain from immediate purchases of US dollars to ease pressure on the yuan.

Supported by all of these factors, the Australian dollar rose above 0.644 early Thursday. On the daily time frame in the Asian session, the currency also remained in the bullish territory within the range of 0.6415-0.6455. It is also possible that the aussie was boosted by today's domestic data.

According to today's reports, the Australian labor market added jobs in August. At the same time, wages also increased. Although expectations for interest rates in Australia remain unchanged, the global rise in commodity prices can make a difference in the long run.

The New Zealand dollar saw its second consecutive session of gains on Thursday. It spent the Asian trading session in range, approaching its weekly high. The kiwi is supported by a possible pickup in economic activity in China, New Zealand's main trading partner.

The increase in tourist traffic during the holiday season is also expected to boost the New Zealand economy. New Zealand Prime Minister Chris Hipkins in his election speech stated that the country's GDP was likely to accelerate slightly by the year-end.

This was great news for the market after the country was facing a technical recession in the first half of 2023. The kiwi climbed to a high of 0.5930 on the news.



00:00 Intro
00:25 Oil and soaring prices
01:08 CME FEDWATCH TOOL
02:01 USDX
02:49 Kazuo Ueda
03:28 JAPAN REUTERS TANKAN INDEX
04:17 USD/JPY
05:18 AUD/USD
06:26 NZD/USD

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