Dollar-Yen soars to fresh 34-year peak – BoJ’s Ueda warns on weak JPY

US 10-year Treasury yield lifts to 4.63% on robust economic data

Summary: The US 10-Year Bond Yield lifted to 4.63%, from 4.52% previously, following stronger than expected economic data. Two-year US rates climbed to 4.98% (4.90%).

The Philadelphia Fed Manufacturing Index soared to 15.5 from 3.2 previously. Weekly Claims for Unemployment Benefits in the US fell to 212K, beating expectations at 215K.

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies, soared to 106.15 from 106.00, a 5-month high.

Against the yield sensitive Japanese Yen, the Dollar (USD/JPY) jumped to 154.68, highs not seen since 1990. Finance ministers from the US, Japan, and South Korea agreed to coordinate on foreign exchange markets in their first trilateral meeting. USD/JPY settled at 154.65.

Rhetoric from Federal Reserve officials continued to point to the resilient economy, reiterating that the US central bank is in no rush to reduce interest rates.

The Australian Dollar (AUD/USD) slid to 0.6420 from 0.6470 after Australia’s Headline Employment fell 6,600 in March, softer than consensus of +10,100. The Unemployment Rate eased to 3.7% from 3.8%.

The Euro dipped against the US Dollar to 1.0645 from 1.0665 previously. Dovish comments from ECB officials weighed on the shared currency. European Central Bank Vice President Francoise Villeroy said that, barring a major surprise, the ECB would cut rates in June.

Sterling (GBP/USD) eased to 1.2435 from 1.2455 while the Euro (EUR/USD) slid to 1.0645 (1.0660). The UK 10-year Gilt Yield soared to 4.27% (4.14%) while Germany’s 10-year Bund Rate jumped to 4.27% from 4.14% previously.

Higher US bond yields pushed the Greenback up against the Asian and Emerging Market currencies (EMFX). The USD/SGD pair (US Dollar-Singapore Dollar) rallied 0.63% to 1.3615 (1.3585). Against China’s Offshore Yuan, the US Dollar climbed to 7.2675 from 7.2575.

Global Stocks fell. The DOW settled at 37,743 (37,897) while the S&P 500 dipped to 5,007 from 5,130 previously. Japan’s Nikkei tumbled to 37,740 from 38,893 previously.

Other data released yesterday saw the Eurozone Current Account climb to +EUR 3.54 billion, beating estimates +EUR 3.22 billion. US Leading Indicators fell -0.3% from 0.2% previously.

USD/JPY – In yet another roller coaster trading session, the Greenback soared to an overnight and June 1990 peak at 154.68 before easing to close at 154.65. Earlier, the US Dollar traded to an overnight low at 153.94 Japanese Yen.

AUD/USD – The Aussie Battler tumbled to 0.6420 from 0.6470 previously, weighed down by a more robust Greenback and tepid Australian Jobs data. In another roller coaster trading session, the AUD/USD pair traded to an overnight low at 0.6416 whilst the overnight high recorded was at 0.6543.

EUR/USD – The Euro dipped further against the Greenback to 1.0645 from 1.0665 previously. Bearish ECB rhetoric and a broadly based stronger US Dollar weighed on the shared currency. The Euro traded to an overnight high at 1.0690.

GBP/USD – Sterling slid against the broadly-based stronger US Dollar to 1.2435, from 1.2455 previously. The British currency traded to an overnight high at 1.2485 while the overnight low recoded was 1.2433. There were no major data releases out of the UK yesterday.

On the lookout

Welcome to Friday. Today’s economic calendar kicks off with Japan’s March Headline Inflation Rate (m/m f/c 0.1% from 0.0%; y/y f/c 2.7% from 2.8% - ACY Finlogix), and Japanese Headline Core Inflation Rate (y/y f/c 2.7% from 2.8% - ACY Finlogix). There is no other major economic data released out of Asia today. Europe starts off with Germany’s March PPI report (m/m f/c 0% from -0.4%; y/y f/c -4.2% from -4.1% - ACY Finlogix).

The UK follows with it’s March Retail Sales (m/m f/c 0.3% from 0.0%; y/y f/c -4.2% from -4.1% - ACY Finlogix), UK March Core Retail Sales (excluding fuel) – (m/m no f/c, previous was 0.2%; y/y no f/c, previous was -0.5%).

Trading perspective

With the USD/JPY pair soaring to fresh 1990 highs overnight (154.68), Japanese officials have already been on the wires. Bank of Japan President Kazuo Ueda, fresh from attending the G20 Finance Ministers in Washington DC, USA said that central bank may raise interest rates again if the Yen’s decline considerably increases inflation. The USD/JPY pair was little-changed, at 154.60 following Ueda’s comments.

Expect a nervous start to FX trading in Asia today with the focus on the Dollar-Yen and Japan.
The Dollar Index (DXY) climbed 0.29% higher to finish at 5-month highs. Markets will monitor remarks of several Federal Reserve Officials, some of whom have already spoken. John Williams, New York Fed President said that there is no urgent need to cut interest rates. Atlanta Fed President Bostic remarked that he is open to a rate hike if inflation does not continue to move toward the Fed’s 2% goal, as he expects it will.

The International Monetary Fund (IMF) also has its meetings today and tomorrow in Washington D.C., USA. Traders will be monitoring any significant remarks from this event.
Every yield tells a story. At present, US yields are telling a hawkish tale. Which will continue to support the Greenback against its Rivals. The risk, as we approach the weekend, is a paring of speculative long USD bets. Welcome to Friday!

USD/JPY – The Dollar reversed its slide, rebounding against the Japanese Yen following the lift in US bond yields. Look for immediate resistance today at 154.70 and 155.00 to cap any gains. Immediate support lies at 154.20, 153.90 and 153.60. With Japanese officials vigilant on the USD/JPY exchange rate, expect choppy trade in this currency pair today. Likely range, 153.50-155.00. Prefer to sell USD/YEN rallies today. Long USD/JPY bets are way overcrowded.

AUD/USD – The Australian Dollar slid to 0.6420 against the broadly based stronger US Dollar. The fall in Australia’s Employment in March pressurized the Battler. Immediate support lies at 0.6390 and 0.6360. On the topside, look for immediate resistance at 0.6450 (overnight high traded was 0.6457). The next resistance can be found at 0.6480 and 0.6510. Look for a choppy trading day, likely between 0.6380-0.6480. Prefer to buy on weakness today with speculative Aussie short bets overstretched.

EUR/USD – The shared currency eased further against the US Dollar to1.0645 (1.0660). Look for immediate support at 1.0620 followed by 1.0590 and 1.0560. Immediate resistance can be found at 1.0690 (overnight high) and 1.0720. Look for the Euro to trade in a likely range today of 1.0630-1.0730. Trade the range, nice and wide.

GBP/USD – Eased modestly against the US Dollar to 1.2437 at the New York close, against 1.2455 previously. Look for immediate support in the British currency at 1.2400 followed by 1.2370 and 1.2340. On the topside, immediate resistance lies at 1.2365 and 1.2385 (overnight high). The next resistance level is found at 1.2415. With Sterling approaching 5-month lows near 1.2400, the preference is to buy dips. Net speculative short GBP bets are also overcrowded. The preference is to buy GBP dips in a likely range today of 1.2400-1.2500.