US dollar broadly lower
The US dollar eased on Friday after the rise in US yields post-data quickly ran out of steam, with the US 10-year finishing near unchanged around 1.55%. That left the dollar index 0.49% lower at 90.83, easing further in Asia to 90.70. Most of the fall can be attributed to the euro, which rallied powerfully by 0.68% to 1.2095 after robust PMI data alleviated slow-down fears. EUR/USD closed above its 100-day moving average (DMA) for the week, a bullish technical development. On a slow news day, EUR/USD looks set to rest at 1.2150 in the European session.
The reappraisal of the previously dismal European outlook has capped any sterling gains versus the greenback. EUR/GBP buying has capped GBP/USD at 1.3910 even as EUR/GBP has rallied to 0.8715, just shy of resistance at 0.8720. Sterling will struggle against both as the market unwinds weeks of negative European positioning.
Both the Australian and New Zealand dollars have added nearly one per cent over the past two trading sessions. As risk barometers, both are clearly signalling market sentiment at the moment and look set to test resistance at 0.7800 and 0.7230, respectively, shortly.
The Indian rupee has found some respite over the past few sessions, with USD/INR falling back below 75.00. The market appears to be pricing India will move past the present Covid-19 situation, and the rupee is benefiting from a general risk-positive attitude to Asian currencies in general. USD/INR is set to fall again today after preliminary data suggests that Mumbai and New Delhi cases could be peaking, even if the situation remains dire elsewhere.
Across Asia in general, regional currencies have rallied, with the KRW and MYR at one-month highs. Only the Thai baht and Indonesian rupiah are lagging. The Thai baht is because of Thailand's Covid-19 outbreak. The rupiah is lower as markets remain concerned that the Bank of Indonesia’s last cut may have been one too far, leaving it vulnerable to rising US yields.
Ahead of an acceleration in the global data calendar and heavyweight US earnings releases this week, the US dollar will remain on the back foot throughout today as US yields remain benignly becalmed, allowing risk sentiment to flourish.