The US dollar was trading not far off from last week’s highs on Monday when it rallied on hawkish Fed minutes that raised the prospect of a June or July rate hike.
There were more hawkish comments yesterday from Boston Fed President Eric Rosengren, who added to the strong signals coming from FOMC members in recent days. In an interview with the FT, Rosengren said that the conditions set out in the minutes are “on the verge of broadly being met.”
The comments helped the dollar hold steady at the start of Asian trading today, but a larger-than-expected trade surplus in Japan dragged the currency lower against the yen. Japan’s trade surplus increased to 824 billion yen in April, almost double the expected figure.
The surplus was fuelled by a bigger-than-expected drop in imports which plummeted by 23.3% year-on-year in April. Exports were also down, falling by 10.1% year-on-year, though this was broadly in line with expectations.
The dollar eased to around 109.70 yen in late Asian trading today, down from Friday’s three-week high of 110.58 yen.
The bleak export figures and the firmer yen weighed on Tokyo stocks today as the Nikkei 225 index closed down 0.5%. Also weighing on investor sentiment in Japan were reports that Japan’s finance minister told his US counterpart at the G7 meeting at the weekend that there will be no delay to the planned sales tax increase.
In contrast, European and US equities rebounded strongly on Friday to recoup some of their losses post the FOMC minutes.
In European currencies, the euro and the pound rose slightly against the dollar to 1.1230 and 1.4520 dollars respectively, while commodity currencies such as the Australian and New Zealand dollars also headed higher on Monday. The Aussie was slightly higher at 0.7243 versus the greenback in late Asian trading, but the kiwi was up more sharply and broke above the 0.68 level.
Commodities were mixed on Monday as oil prices fell but copper prices were firmer, while gold was flat. US oil futures were down over 1% and were trading around $47.80 a barrel in Asian trading on Monday.
Oil’s weekly gains were capped on Friday when the latest US oil rig count showed the number of active rigs were unchanged on the week, breaking a 2-month run of falling rigs.
The rest of the day is expected to relatively quiet, with the flash Markit PMI readings for the Eurozone for May being the only major data of the day. However, speeches by the Fed’s Bullard, Williams and Harker are also likely to attract attention ahead of a busy week for Fed policymakers.