Tuesday, March 26, 2024

Capital Markets: "Dollar's Recent Gains Pared but Firm Undertone Remains Intact"

From Marc to Market:

Overview: After surging at the last week, the dollar consolidated yesterday and is continuing to do so today as slightly lower levels. The Swiss franc is the only G10 currency unable to gain traction against the greenback today. Still, the dollar's pullback has barely met the minimum retracement targets of the jump last Thursday and Friday. The PBOC lower the dollar's fix slightly, but the proverbial toothpaste is out of the tube and officials are struggling to reestablish order. Against the offshore yuan, the dollar remains outside of its 2% onshore band. The Hungarian forint is the strongest of the emerging market currencies ahead of the central bank's rate decision, where a 75 bp cut is expected after the base rate was slashed by 100 bp last month.

Asia Pacific equities rallied, led by the Hang Seng and mainland shares that trade in Hong Kong. Most of the other large bourses rose with the notable exception of Taiwan, Australia, and India. Europe's Stoxx 600 is treading water after eking out a minor gain yesterday. US index futures are enjoying modest gains. European 10-year yields are mostly 3-4 bp lower. The 10-year US Treasury yield is off one basis point to about 4.23%. Yesterday's $66 bln US two-year note sale generated a small tail, but underlying demand seems reasonably strong. Today, the Treasury comes back with $67 bln five-year notes and a $70 bln cash management bill. Gold is trading firmly above $2190. The highest close last week was around $2186.40. A new record high close is possible today. May WTI is trading quietly in around a 30-cent range around $82.

Asia Pacific
The currencies are the three largest Asia Pacific economies remain weak....