Forex Today: BoJ’s Ueda smashes USD/JPY, US Dollar suffers

Here is what you need to know on Monday, September 11:

Risk sentiment remains in a firmer spot early Monday, helped by a rally in the Chinese stocks after an uptick in the country’s inflation showed tentative signs of stability in the world’s second-largest economy. China’s Consumer Price Index (CPI) increased 1.0% YoY in August, reversing a drop of 0.3% reported in July.

The US S&P 500 futures gain 0.30% on the day while the US Treasury bond yields are 1% higher after US Treasury Secretary Janet Yellen said over the weekend that she is “feeling confident about a soft landing for the US economy.”

With risk-on flows dominating at the start of the critical US CPI inflation week, the United States Dollar (USD) remains heavy, shrugging off positive US Treasury bond yields. The main reason behind the decline in the US Dollar could be linked to the ongoing sell-off in the USD/JPY pair. The US Dollar Index (DXY) is correcting from near six-month highs of 105.16, currently trading 0.40% lower on the day near 104.60.

The Japanese Yen witnessed a big-figure bullish opening gap against the Greenback, smashing USD/JPY below 147.00, as Asian traders reacted to the weekend’s hawkish comments delivered by Bank of Japan (BoJ) Governor Kazuo Ueda. Ueda said that the central bank’s focus will now be on “a quiet exit”, signaling possible interest rate hikes. USD/JPY is extending the Asian slide into early Europe, trading at around 146.00, down nearly 1.20% so far.

EUR/USD is recovering ground above 1.0700, having hit a three-month low at 1.0686 last Thursday. GBP/USD is holding notable gains above 1.2500, with traders awaiting Bank of England (BoE) Chief Economist Huw Pill’s speech and policymaker Mann’s speech later in the day.

AUD/USD is trading firmer above the 0.6400 level, up 1% on the day, cheering Chinese inflation turnaround and a broad-based US Dollar weakness. Meanwhile, USD/CAD has surrendered 1.3600, despite a sideways trading action in WTI prices.

Gold price is extending the recovery gains, closing in on the 50-Daily Moving Average (DMA) at $1,932 amid unabated US Dollar selling, which outweighs the strength in the US Treasury bond yields, for now.

The economic calendar is devoid of any top-tier data releases on both sides of the Atlantic, leaving the FX board at the mercy of risk trends and the sentiment surrounding the US Dollar.