SPY391.77+4.27 1.10%
DIA319.53+4.14 1.31%
IXIC13,597.97+132.77 0.99%

CURRENCIES: Recent FX Action Across the Bands

· 02/05/2021 01:53

06:49 AM EST, 02/05/2021 (MT Newswires) -- As at near 6.45am ET, the dollar had traded more mixed, still holding firm, but with the pound and dollar bloc holding their own. The DXY dollar index had edged out a fresh two-month high, this time at 91.60, in what is its fifth consecutive up day, underpinned by an improving yield advantage relative to the euro and other peers (with UK gilt yields being the main exception). EUR-USD printed a new two-month low at 1.1952. The 10-year U.S. note yield rose above 1.16% yesterday, nearly 16 bp above recent lows, since then settling a couple of basis points lower. Strong corporate earnings and improving U.S. fundamentals (jobless claims and factory orders yesterday beat expectations) have been supporting the dollar, alongside expectations for the US$1.9 trillion stimulus bill after the Democrats moved to fast-track it. The MSCI All Country World Index lifted to within a few points of its record high. Risk appetite has also been aided by a 44% drop in new positive Covid test results in the U.S., and a 30% drop globally (which, as its too earlier for vaccinations to have made a significant impact, may also reflect rise herd immunity and/or more accurate PCR testing after the WHO last month lowered its recommended cycle thresholds to be used, which may have reduced the incidence of false positive results).

The risk-on vibe in markets has helped the dollar bloc and other cyclical currencies hold their own against the greenback. USD-CAD has settled near the 1.2800 level, close to the midway mark of the recent range. The pair has been rendered a little less sensitive to oil price influences as the U.S. currency's favourable yield differential shift has counterbalanced the Canadian dollar's link to oil price gains. Front-month WTI oil futures today clocked a fresh one-year high at $57.09. Meanwhile, AUD-USD has been trading narrowly near 0.7600. The RBA's quarterly statement on monetary policy stuck to the script and repeated that the bank can still extend asset purchases if needed. The central bank surprised most earlier in the week by extending its QE program. Elsewhere, the pound has remained buoyant after the BoE's more upbeat than expected guidance, which led to a spike in UK yields. Sterling earlier edged out a fresh nine-month peak against the euro, while Cable breached above Thursday's peak in making a high at 1.3712.