Dollar holds firm on rise in US yields, Aussie slips
Tue Feb 05 2019
The dollar held on to recent
gains against its peers on Tuesday, supported by a recovery in investor risk
appetite, which gave an overnight boost to US yields, while the Australian
dollar dipped on dismal retail sales data.
The dollar index, which measures
the greenback against a basket of six key rivals, was barely changed at 95.824
after gaining for three straight sessions. “The overly pessimistic view on
developed economies and the overly dovish view on the (Federal Reserve) is
being unwound,” said Masafumi Yamamoto, chief currency strategist at Mizuho
Securities.
Trading was likely to remain
subdued in Asia with many markets across the region closed for Lunar New Year
holidays for much of the week. The index rose 0.7 per cent after dipping last
week below its 200-day moving average for the first time since early January
2018.
It gained as Treasury yields rose
with that of the 10-year jumping 9 basis points over the past two sessions.
Yields have climbed after MSCI's gauge of global stocks hit a two-month high on
Monday as optimism over recently concluded US-China trade talks helped send US
technology and industrial shares higher.
Against the Japanese yen, the
dollar gained 0.1 per cent to 109.99 yen. It had risen above 110 yen for the
first time since December 31 overnight. “There's further room to rise for the
US two-year yield. If this move continues, dollar/yen will rise above 110”
again, said Mizuho's Yamamoto.
The euro was flat at $1.1438, off
three-week high of $1.15145 set on Thursday. The Australian dollar shed 0.3 per
cent to $0.7209 as local retail sales for December came in weaker than
expected, capping a lousy quarter of disappointing data in yet another blow for
the economic outlook.
The Reserve Bank of Australia
(RBA) will make a policy decision on Tuesday, followed by a highly-anticipated
speech by Governor Philip Lowe on Wednesday. The central bank is all but
certain to hold rates at record lows, though some market players now see a cut
later this year due to mounting signs of economic weakness.
Sean Callow, Sydney-based senior
currency strategist at Westpac, said the RBA would likely lower its 2019 and
2020 gross domestic product forecasts from wildly bullish to just upbeat.
“Overall this should be net positive for the Australian dollar, but probably
not greatly, given the stubbornness of interest rate markets in pricing in rate
cut risk,” Callow said. “Since today's statement has to be a little less gung
ho on growth and the global outlook, the doves will have something to seize
upon.”
Sterling was basically flat at
$1.3038 after seesawing during the previous session on uncertainty over the way
Britain will leave the European Union. In late Monday trade, sterling gave up
gains made earlier in the day after a newspaper report said that goods shipped
to Britain from the European Union could be waved through without checks in the
event of a “no-deal” Brexit.
The Canadian dollar was a shade
weaker against the greenback. It fell one tenth of a per cent overnight,
reversing some of last week's rally, as oil prices fell and the greenback
broadly climbed.
Source: Reuters