US FX WRAP: Dollar sees two-way trade, as Yen gains on Bessent remarks

The Dollar Index was more-or-less flat, and saw choppy trade on Wednesday. Through the US morning, the Greenback saw losses, albeit on no clear headline catalyst, but soon reversed, and more, as the US Treasury Buyback announcement disappointed; the Treasury is to buy back a maximum of USD 6bln in 10-20year Treasuries on Thursday, which was against guidance for at least USD 4bln, but some had expected the figure to be as high USD 10bln. Elsewhere, Dollar-specific newsflow was sparse, as there was no US data and of course no Fed speak amid blackout. Ahead, traders await PPI and CPI on Thursday and Friday, respectively.

G10 FX performance was mixed against the Greenback; the Yen was the clear gainer and the talk of the town, GBP, EUR, and AUD were all flat, while CHF, CAD, and NZD eked out varying degrees of losses. For the Yen, USD/JPY hit a low of 152.39, and came after very punchy US Treasury Secretary Bessent comments overnight; said he has good insight when they intervene on the Yen, and bet against him if you want and that he has information. Bessent added he has good insight into what the BoJ and policymakers will do. As such, focus will attentively be on the BoJ next week.

Loonie saw mild pressure following the US banning imports of some Canadian alcohol, dairy and motorcycles. Currency-specific newsflow for other G10s was light, with ECB the main risk event on Thursday away from the US; as a reminder, the ECB is set to raise the Deposit Rate by 25bps to 2.50%, whereby focus will be on the updated staff projections, where 2027 HICP is expected to be lifted slightly. In addition, focus will be on any guidance beyond September, though Lagarde will likely reiterate a data-dependant approach, albeit hawkish risks dominate.