Forex Today: Dollar holds above 97 handle but yields weigh, Yen strong, Aussie weak, US /China trade tension unresolved
|- Forex today was hampered in a big way by the mood on the street following a breakdown in global equity markets and the commodity space as investors predict a prolonged trade spat between the two largest economies of the world.
The greenback was a touch softer as US yields continued to slide following the flight to safety. The US 10yr treasury yield fell from 2.44% to 2.39%, while the 2yr yield fell from 2.24% to 2.17%. The chance of a Fed rate cut by December, implied by Fed fund futures, rose from 90% to above 100%. The greenback subsequently dropped 30 index points but help a few pips above 97 the psychological figure.
The main news stayed with rolling trade spat statements from both sides filtering through the Twitter feeds as observers and news platforms passed them about, hitting the markets and risk sentiment. China launched its own broadside of tariffs on $60 billion of U.S. imports in retaliation to the Trump administration raising tariffs on $200 billion of Chinese imports. President Donald Trump also said the U.S. was ready to impose another round of tariffs on $300 billion of Chinese goods;
Currency action (analysts at Westpac summarised main movers for Asia today):
- EUR/USD initially rose from 1.1230 to 1.1263 but retraced after the China headlines.
- USD/JPY fell from 109.80 to 109.02 – a three-month low – with defensive currencies such as the yen and Swiss franc outperforming.
- The worst performer was the trade-sensitive AUD, falling from 0.6980 to 0.6941 – the lowest since Jan 2016 (excluding Jan’s intraday spike).
- NZD fell from 0.6590 to 0.6564.
- AUD/NZD fell from 1.0600 to 1.0570.
Key notes from U.S. session:
Wall Street closes in the red following Chinese retaliation, DJIA bears eye 4HR 200 SMA
Key events ahead:
The April NAB survey of Australian business confidence is due at 11:30am Syd/9:30am Sing/HK.
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