Risk aversion dominates, US Dollar sold-off

By FXStreet FXStreet (Bali) – Risk-aversion conditions have settled in during the early going of the Tokyo session, with the Nikkei 225 down over 1.3% while S&P 500 futures were sold by 1%.

Text-book risk-off moves

Gold has spiked higher towards $1,136.00, breaking Monday’s high, while AUD/JPY is selling-off to a session low of 86.00 ahead of today’s China PMI, RBA. The US Dollar index (DXY) is also undergoing selling pressure, while the 30-yr Treasury bonds are little changed.

USD/JPY leads the ‘risk-off’ beneficiaries pack

As an interesting observation, today’s USDJPY implied volatility is significantly higher than yesterday’s on the Aug contract (expires in 4days, 20+% jump in impl vol) with puts getting pricier than calls.

Is the market expecting institutional traders/big boys returning to desks in Sept to own some yens given the risk-off conditions in August? With the US NFP risk event around the corner, which represents a make-or-break event to gauge Fed’s willingness to hike rates in Sept, the market’s nerves are running thin.
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Source:: FX Street