04 July, 2017
The dollar steadied on Monday's market after the U.S. government bond reaches their best state and the highest in seven weeks, helping the greenback recover from its lowest quarterly performance since late 2010.
The BNP Paribas' analyst Sam Lynton-Brown in London noted that "The reason why USA yields have gone up is important: they have been following European yields higher in the past week", Brown added that "What that tells you is that dollar-yen is the safest dollar long and dollar-yen is near the highs". For example, while Germany's 10-year bunds surged more than 20 bp last week, that's still significantly less than USA yields, and the yields on the Japanese Yen are lower still. Yen yields are another 40 basis points lower. What is also significant say currency strategists is that U.S. yields are following those in Europe and Asia.
"What that tells you is that dollar yen is the safest dollar long and dollar yen is near the highs".
It gained 0.4 per cent to 112.82 yen but with oil prices nearly 1 per cent higher, was slightly less robust against the bloc of major currencies seen as closely linked to commodities prices.
Against the basket of major currencies, the dollar index fell by 1.7 percent last week and gained 0.5% as U.S. Treasury yields rose.
DOLLAR GAINS BECAUSE OF THE FIRMER START OF EUROPEAN SHARES
"Even as significant parts of rest of the world has been hawkishly repriced, pushing the broad Dollars to fresh lows, none of these developments invalidate the thesis that USA rates need to more fully price in the Fed (raising rates)", JP Morgan's Daniel Hui said in a weekly note on FX markets.
All eyes on Tuesday will be on the Reserve Bank of Australia for signs of it joining the hawkish chorus among major central banks. For June, it had its steepest monthly loss in a year.
Against the yen, the dollar was up 0.9% at Yen113.40, compared with Yen112.46 late Friday in NY.
In other currency pairs on Monday, the pound slipped back below the $1.30 handle after the United Kingdom manufacturing purchasing managers index for June fell short of forecasts and dropped to a three-month low (http://www.marketwatch.com/story/uk-manufacturing-pmi-slows-to-3-month-low-2017-07-03).
"Today's PMI release poses a challenge for the BoE's hawks, possibly contradicting the view that activity and inflation will surprise to the upside in 2017", Barclays economists said in a flash note after the data.