FX market outlook

FX market outlook

Posted on Tuesday, April 18 2017 at 8:19 am GMT+0000

Dollar rebounds off five-month lows against yen; focus on US – Japan dialogue.

The US dollar rebounded on Tuesday, with the help of some comments from US Treasury Secretary Steven Mnuchin, which restored some demand for the greenback.

US Treasury yields move higher, which was supportive for the dollar and lifted it off five-month lows against the yen. The dollar index, which gauges the US currency against a basket of six major counterparts, was flat around 100.18.

Mnuchin said that a strong US dollar would be positive over the long term, although he did acknowledge that it hurts exports in the short term, something that US president Donald Trump commented on last week.

The dollar rose to an Asian session high of 109.21 yen. On Monday, the pair touched a five-month low of 108.12 as safe haven demand due to concerns over North Korea strengthened the Japanese currency. Focus will remain on the dollar / yen pair today as the US – Japan economic dialogue kicks off. Talk are scheduled between US Vice President Mike Pence and Japanese leaders Prime Minister Shinzo Abe and Deputy Prime Minister Taro Aso.

The Australian dollar was one of the worst performing major currencies during today’s Asian session after it fell following the release of the minutes of the RBA’s April meeting, in which the central bank left rates unchanged. The minutes highlighted the mounting risks in the domestic housing market. On Monday, the aussie was lifted above the key $0.7600 level against the greenback to reach a two-week high following upbeat Chinese growth data.

In today’s Asian session, the aussie dipped to as low as $0.7545. Meanwhile, weaker iron ore prices, Australia’s key export, also weighed on the currency.

The euro was steady in Asian trading, at around $1.0646, following a rise to $1.0670 on Monday. The main risk event for the single currency will be the French elections this Sunday. Markets are concerned that far-right candidate MarineLe Pen will qualify for the second round.

In commodities, gold slipped from Monday’s five-month high of $1295.38 an ounce to trade around $1283.20 in Asia.

Oil prices consolidated Monday’s losses, amid concerns over rising US production. WTI oil traded at $52.60 a barrel, while Brent crude traded around $55.32 a barrel.

Looking ahead to the rest of the day, US housing starts and building permits for March are due, as well as industrial production data. Focus will also be on the US – Japan dialogue.