The continued rise in US yields is making for a less benign environment and favours risk reduction. Whilst higher US yields may push USD/JPY close to 150, they also increase the risk of an equity setback. That is why we think an instrument like the one-month USD/JPY downside risk reversal may be too conservatively priced. 

And in general, we would say commodity currencies remain vulnerable, especially those like the South African Rand and Latam currencies – this latter group were hit hard during the early August sell-off in Treasuries.

DXY can probably stay bid through this if activity currencies come under pressure and technical analysts will be dusting off calls for a move to the 107.20 area.