From Marc to Market:
US Dollar Comes Back Bid
The US dollar is well bid in the Europe and is poised to start the North American session with the wind to its back. Despite firmer equity and industrial metal prices, most emerging market currencies are also succumbing to the rebounding greenback.
The euro has yet to convincingly breakout of the range that has confined it this month. That would require a break of the $1.1300 area. However, as we have noted the two-year interest rate differential between the US and Germany, which does a fair job tracking the euro-dollar exchange rate, has been recovering in the dollar's direction for several days, setting the stage for euro setback after repeatedly trying to convincing push through the $1.1450. It may require a break of the $1.1270 area to lead more into thinking the euro has put in a top of some importance.
The US dollar is also pushing higher against the Japanese yen. The seven-day losing streak was snapped yesterday and today the greenback is trading at a four-day high, above JPY109. The JPY110 area is the next target. The two-day gain for the dollar could be the largest since February and would seem to undermine the case for intervention. It is a better two-way market. However, as the decline in Japanese producer prices (-3.8% in March from -3.4% in February), serious challenges for the Japanese economy remain. A couple of government advisers have called for more fiscal and monetary action.
Global equities are advancing for the fourth sessions. The MSCI Asia-Pacific Index rose for the sixth consecutive sessions and the 1.8% gain today is the most in the streak. It gapped higher today and closed at its best level since the start of the year. News that China's exports and imports fell less than expected helped provide additional impetus. Iron ore prices were up the daily limited in China and have now risen 11% over this week....MORE