US Dollar slides, but support holds ahead of holiday break – DBS

Despite the DXY Index’s 1% fall to a three-year low of 99.26 overnight, we are cautious and mindful that the DXY has yet to break below the intra-day low of 99 seen on April 11, DBS' FX strategist Philip Wee reports.

Markets seek safety in bonds as equities extend losses

"Unlike last week, no de-dollarisation fears were inferred from investors dumping US Treasuries while exiting US equities. Yesterday, investors sought safety in bonds, driving the US Treasury 10Y yield lower a third day by 5.6 bps to 4.277% amid the 2.2% decline in the S&P 500. Markets may reverse again before US stock markets close on Good Friday; the US bond market will close early today in observance of Maundy Thursday."

"Fed Chair Jerome Powell affirmed that Trump’s significantly higher-than-expected tariffs would lead to stagflation and pose a challenge to the Fed achieving its dual mandate of price stability and full employment. Apart from the blunt tone, Powell’s comments did not deviate from his colleagues’ narrative for an extended pause. The Fed sees tariffs lifting prices but will refrain from hiking rates as long as long-term inflation expectations stay anchored amid a rising unemployment rate on a slowing economy."

"Powell said the Fed was ready to provide dollars overseas, a tacit reaffirmation of the USD’s dominant role as the world’s reserve currency. This comment also implied agreement with Fed Governor Christopher Waller’s recent assessment to look past high inflation and cut cuts if a recession becomes imminent."