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FOREX-Dollar pinned near two-week troughs amid lower U.S. yields

Published 08/04/2021, 03:23 pm
Updated 08/04/2021, 03:24 pm
© Reuters.
EUR/USD
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USD/JPY
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US500
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C
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US10YT=X
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* Fed minutes offer no new catalysts to lift greenback

* Higher U.S. stocks sap demand for dollar as a haven

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Kevin Buckland

TOKYO, April 8 (Reuters) - The U.S. dollar traded near more than two-week troughs versus major peers on Thursday, tracking Treasury yields lower, after minutes of the Federal Reserve's March policy meeting offered no new catalysts to dictate market direction.

Fed officials remained cautious about the risks of the pandemic - even as the U.S. recovery gathered steam amid massive stimulus - and committed to pouring on monetary policy support until a rebound was more secure, the minutes showed Wednesday. Chair Jerome Powell will speak at a virtual International Monetary Fund conference later on Thursday.

The dollar index =USD which measures the greenback against a basket of six currencies, edged lower to 92.371 in the Asian session, after dipping to as low as 92.134 on Wednesday for the first time since March 23.

The gauge rallied to an almost five-month high of 93.439 at the end of last month as the U.S. pandemic recovery outpaced most other developed nations, particularly Europe.

"Hard to argue that the U.S. macro outperformance trade is exhausted; the strong vaccine drive, reopening and stimulus set to produce some exceptionally strong rebound data in the next several months," Westpac strategists wrote in a report, forecasting a run at 94.5 for the dollar index, also known as DXY.

"Admittedly though, the next DXY upleg may take a few weeks before it develops momentum - a lot of good news is priced in."

The benchmark 10-year Treasury yield US10YT=RR was around 1.67% on Thursday, after dipping below 1.63% overnight. It hit a more than one-year top of 1.776% late last month.

The S&P 500 .SPX eked out a modest gain on Wednesday, moving mainly sideways since surging to a record high to start the week.

The chief currency strategist at Citigroup (NYSE:C) Global Markets Japan, Osamu Takashima, said that the market's direction is difficult to call, but expects the next move for the greenback to be lower.

"Current market sentiment is mild risk-on, and under such circumstances the dollar will weaken gradually - but no big moves," he said.

The retreat in U.S. yields has also removed a driver for dollar gains, he added.

The dollar weakened slightly to 109.66 yen JPY= , consolidating after its retreat from a more than one-year high of 110.97 reached on March 31.

The euro EUR= was almost unchanged from Wednesday at $1.18715, after rebounding from the almost five-month low of $1.1704 touched on March 31.

"The vaccination progress in the Eurozone is significantly lagging that of the U.S., and coronavirus infection rates in the Eurozone are on the rise again," Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.

"As such, EUR/USD is vulnerable to a move lower towards 1.1700 in the near-term."

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Currency bid prices at 518 GMT Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Euro/Dollar

EUR=EBS

$1.1874

$1.1873

+0.02%

-2.81%

+1.1876

+1.1861 Dollar/Yen

JPY=D3

109.6750

109.7750

-0.09%

+6.18%

+109.8950 +109.6750 Euro/Yen

EURJPY=

130.23

130.37

-0.11%

+2.61%

+130.4700 +130.1600 Dollar/Swiss

CHF=EBS

0.9291

0.9297

-0.04%

+5.04%

+0.9302

+0.9293 Sterling/Dollar GBP=D3

1.3760

1.3740

+0.15%

+0.72%

+1.3767

+1.3734 Dollar/Canadian CAD=D3

1.2603

1.2607

-0.03%

-1.02%

+1.2627

+1.2603 Aussie/Dollar

AUD=D3

0.7633

0.7612

+0.25%

-0.80%

+0.7635

+0.7603 NZ

NZD=D3

0.7028

0.7014

+0.20%

-2.13%

+0.7030

+0.7005 Dollar/Dollar

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates

https://tmsnrt.rs/2RBWI5E

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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