Surprisingly, the US dollar managed to take advantage of default fears. It climbed as a safe-haven asset following Fitch Ratings' warning that the US could begin to miss payments on some of its obligations.

The US dollar regained its upward movement amid such statements almost instantly and jumped to a new 7-week high of 104. In the Asian session, the greenback was trading in the bullish channel of 103.8-104.2.

In addition, the Fed meeting minutes were released yesterday. They also helped the US dollar rise. The minutes revealed that Fed policymakers had completely different opinions on monetary policy. However, they were sure that there would be no rate cut in 2023. The central bank could take a pause and resume tightening at any time if necessary.

Therefore, the US dollar index has been growing for the fourth consecutive session. It has been maintaining bullish momentum for the third week. After a breakout above 105, the US dollar may rise to the resistance level of 105.7.

Many indicators signal the upside potential of the US dollar although it is somewhat limited. The yield of US government bonds with various maturity climbed as well. At the same time, annual Treasury notes are only a few basis points away from their 23-year high.

Usually, the growing yields of US government bonds are negative for the yen due to the rate gap between the Fed and the BoJ. However, the yen remained unaffected by a rally in the bond market and advanced against the US dollar to 139.4.

Apart from Japanese stocks, investors seem to be revising their portfolios in favor of the yen. It is more attractive as a safe-haven asset amid the endless debates over the debt ceiling in the US.

In the Asian session, it maintained bullish momentum, moving in the price corridor of 138.8–139.7. However, despite this slight pullback, the dollar/yen pair was still rising. It advanced to an annual high of 139.7.

The Australian dollar also fell because of a stronger US dollar. The aussie and the kiwi are rather sensitive to risk sentiment. As risk aversion persists, they have dropped to multi-month lows.

Uncertainty over the debt ceiling deal and signs of an unstable economic recovery in China undermined the rise of the aussie. At the same time, data on the labor market and Manufacturing PMI Index in Australia signaled the high likelihood of a pause in tightening by the RBA next month.

After its three-day losing streak, the aussie slipped to its 6-month low of 0.6530 early Thursday. In the Asian session, the AUD/USD pair continued to decline in the range of 0.6522–0.6549. The bearish outlook will remain in force for some time.

The New Zealand dollar lacked strong drivers as well. The pair slid into the range of 0.6077–0.6116 due to a strong bearish pressure.

After the Reserve Bank of New Zealand hinted at a pause in the tightening cycle, the kiwi/dollar pair has been weakening for the third session in a row. It broke through a 2-month low of 0.6094 and went even lower to 0.6086. The forecast for the pair remains bearish.

00:00 Intro
00:32 US
01:07 Joe Biden and Kevin McCarthy
01:57 USDX
02:59 US 52-WEEK TREASURY NOTES
03:40 USD/JPY
04:30 AUD/USD
05:25 NZD/USD

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