U.S. Dollar Under Pressure

The US Dollar Falls on Friday

The US dollar dipped initially in Asia today, notably against the commodity currencies, but has since regained most of those losses. It diverged from the bond market on Friday, with the falling 0.25% to 90.36, suggesting that the currency market regards a steepening US yield curve as a healthy development. In the bigger picture, the US short-squeeze appears to have run its course for now, as evidenced by its divergence from US yield rises last week. However, I will await a breakout of the dollar indexes 90.00/91.00 recent range for more directional clues.

The has shrugged off COVID-19 fears today, rising 0.20% to 0.7310 after raised its sovereign rating to AA+ from AA. That should support the kiwi going forward, as the AA+ rating moves New Zealand into a very small club, meaning the RBNZ will be competing with a new group of international investors as it looks to keep buying government bonds. NZD/USD broke out of its symmetrical triangle in early February and maintains an initial target of 0.7400.

The PBOC set the fixing at 6.4600 this morning, with the central bank seemingly content to keep USD/CNY between 6.4000 and 6.5000. Along with liquidity withdrawals via the repo market, yuan strength should continue, particularly if the US dollar downtrend is proven to have resumed elsewhere. Asian regional currencies have strengthened slightly versus the greenback in line with the Chinese yuan. With most of the region running dirty pegs to the dollar, any weakness is unlikely to occur unless the Chinese yuan weakens first.

Later in the week, US Personal Consumption Expenditure is likely to show a large jump given the outperformance last week. US second read is also likely to impress, a trend that will accelerate as the US starts to reopen. It will be the Fed Chairman Jerome Powell though that will have the most weighting for markets.

Original Post

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

This site uses cookies to offer you a better browsing experience. By browsing this website, you agree to our use of cookies.