US stocks fell overnight, causing APAC stocks to open lower while the rosy US economic data supported further Fed rate hikes. The S&P 500 lost 0.41%, while the tech- Nasdaq-100 Index fell 0.72%.
A surge in Treasury yields weighed on markets as chances for a 75-basis point FOMC rate hike increased in swap markets. The FOMC blackout period begins this Saturday.
The Institute for Supply Management’s non-manufacturing purchasing managers’ index (PMI) for August supported a hawkish Fed path. The services sector PMI increased to 56.9, up from July’s 56.7 and beating the 55.1 consensus forecast.
The ISM cited increased new orders, employment, and business activity for improvement. The 10-year Treasury yield rose more than 10 basis points (bps) during New York trading hours, pushing the rate to the highest since June.
The Japanese Yen also fell under pressure, as the USD/JPY saw its biggest daily gain since early August. Japan’s July coincident and leading economic indexes for July are due today at 05:00 GMT.
Another driver for the USD was the Chinese Yuan. The USD/CNH rate is approaching 7.000, a level not traded since July 2020. The People’s Bank of China’s daily Yuan fix on Tuesday exceeds analysts’ expectations for the 10th consecutive day.
The AUD also fell against the USD. DXY approaches the 2002 June high as RSI enters overbought conditions