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December 8th - Market speculation persists that the Bank of Japan (BOJ) may raise interest rates this month, but participants remain betting on a continued weakening of the yen. Traders at Bank of America, Nomura Holdings, and RBC Capital Markets say investor positioning reflects this bet. Citigroups "pain index" for the yen remains deep in negative territory, indicating continued negative sentiment towards the yen. Even with BOJ Governor Kazuo Ueda hinting at a possible imminent rate hike and the BOJ reportedly preparing to raise rates in December unless there is a major shock to the economy or financial markets, investors remain bearish on the yen. This is because even if the BOJ takes action, Japanese yields are still expected to be significantly lower than those in the US, which is more favorable for the dollar. Ivan Stamenovich, head of G-10 currency trading for Asia Pacific at Bank of America, said, "Positioning remains geared towards betting on the dollar to continue rising against the yen until the end of the year, and this trend is unlikely to change unless the BOJ delivers a real surprise." He added that Uedas hawkish comments sparked discussion about the currency pair, but market sentiment has not fundamentally changed.On December 8th, Israel Defense Forces Chief of Staff Zamir stated on the 7th that the withdrawal line drawn by the Israeli military under the first phase of the Gaza ceasefire agreement, known as the "Yellow Line," is the "new border" of the Gaza Strip. During an inspection of the Gaza Strip that day, Zamir said that the "Yellow Line" is the "new border" of the Gaza Strip, serving as both Israels forward defensive line and the boundary for Israeli military operations. Israel maintains operational control over large areas of the Gaza Strip and will continue to hold these lines. According to the first phase of the Gaza ceasefire agreement, the area outside the "Yellow Line" remains under Israeli control, and Israeli troops will no longer be stationed or conducting operations within the "Yellow Line."Anson Resources of Australia and Nusano of the United States have signed a lithium supply agreement.On December 8th, Venezuelan Vice President Rodríguez, speaking to oil industry workers at a heavy crude oil processing facility in Anzoátegui state on the 7th, urged the entire industry to remain "highly vigilant," noting that "the enemy never rests." Rodríguez reiterated that, given the current tense situation between Venezuela and the United States, the government will firmly safeguard national sovereignty and independence.Wave Life Sciences will release interim data from its Phase 1 clinical trial of WVE-007 (INHBE) for the treatment of obesity on Monday.

Prior to US Data, the US Dollar Index consolidates recent gains above a 20-year high

Alina Haynes

May 13, 2022 10:13

US Dollar Index (DXY) bulls take a pause around a 20-year high, recently falling to 104.75 as sluggish markets cause consolidation of recent rapid swings, predominantly in favor of the dollar, during Friday's Asian session.

 

The dollar index has risen for three straight days to reestablish a multi-year high at 105.00. The underlying dynamics may be related to the market's anxieties about inflation and growth, as well as the Fed's faster/heavier rate hikes and covid/geopolitical concerns.

 

Nonetheless, the most recent decline in the DXY is influenced by the rebound in US Treasury yields from a two-week low, as well as moderately bid stock futures. The US 10-year Treasury yields exhibit a corrective pullback after touching a two-week low the day before, around 2.86 percent as of press time, whilst the S&P 500 Futures exhibit modest gains while licking their wounds near a one-year low.

 

The US Producer Price Index (PPI) matched expectations of a 0.5% MoM increase and kept inflation fears on the table the previous day. However, Fed Chairman Jerome Powell reaffirmed the expectation that the Fed will raise interest rates by a half-point at each of the next two policy meetings. As markets anticipate a 75-basis-point (bps) rate hike, the same factor may have caused the rates' comeback. On the same line, San Francisco Fed President Mary Daly stated, "Is it fifty, twenty-five, or seventy-five? These are matters that I'll discuss with my colleagues, but my starting point is that we don't want to go so swiftly or abruptly as to startle the American people.

 

In the future, DXY bulls will search for more evidence to validate the Fed's 75 basis point rate hike, which highlights today's preliminary readings of US Michigan Consumer Sentiment data for May, which is predicted to be 64 vs 65.2 before. Risk catalysts, such as covid worries from China and geopolitical events regarding Russia and Ukraine, are also significant for the US Dollar Index.

Technical Evaluation

Despite the recent dip, the DXY's short-term downside is supported by the November 2002 lows and the last month's high, which are near 104.10 and 103.95, respectively. In contrast, bulls are well-positioned to attempt the high of 107.31 from December 2002.

 

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