Forex trends Wednesday: US dollar may remain on the back foot

U.S. five dollar currency notes bills; taken September 2018.

The U.S. dollar was on the retreat Wednesday, particularly against the yen, and analysts were pointing to the likelihood that the greenback would remain on the back foot.

“2019 will be a challenging one for the U.S. economy and the U.S. dollar as America’s longest-ever expansion comes to an end,” Kathy Lien and Boris Schlossberg, managing directors of foreign-exchange strategy at BK Asset Management, said in their 2019 market forecast published this week.

“Volatility is rising, stocks are falling, borrowing costs are increasing, credit is tightening, housing is slowing and earnings growth is weakening,” the note said. “None of this is good for the U.S. dollar,” it said, adding the dollar/yen was the most vulnerable and the pair could fall as low as 105.

Currencies

The U.S. dollar index was at 96.15 at Monday’s close, off highs around 96.50 earlier in the session and levels over 97 last week, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.685 percent at Monday’s close, off highs around 2.740 percent earlier in the session and levels over 2.80 percent last week, according to Tullett Prebon data.

The euro/dollar was at 1.1462 at 8:06 A.M. SGT after trading in a 1.1446 to 1.1545 range on Tuesday, according to DZHI data.

The British pound/dollar was at 1.2748 at 8:06 A.M. SGT after trading in a 1.2721 to 1.2756 range on Tuesday, according to DZHI data.

Yen faces headwinds

The dollar/yen was at 109.613 at 8:07 A.M. SGT after trading in a 109.58 to 109.99 range on Tuesday, down from levels as high as 113.708 in mid-December, according to DZHI data.

“2019 looks particularly challenging for the Japanese economy as the fight against deflation shows little sustained success — the yield on 10-year JGBs slipped back to 0.00 percent — while global growth trends look particularly ominous for the export driven economy,” BK Asset Management said.

“If risk aversion flows continue to rile financial markets, the rise in yen will make conditions more difficult for policymakers who are pretty much out of options at this point,” it said, adding the drop off in household spending was “alarming” as it boded ill for both deflation and aggregate demand.

The dollar/yuan ended Tuesday at 6.8754 after trading in a tight 6.8754 to 6.8760 range on Tuesday, off a spike as low as 6.8469 on Friday, according to DZHI data.

The dollar/Singapore dollar was at 1.3633 at 8:08 A.M. SGT after trading in a 1.3621 to 1.3637 range on Tuesday, off levels as high as 1.3774 in mid-December, according to DZHI data.

The dollar/Malaysian ringgit ended Tuesday at 4.13 after trading in a tight 4.13 to 1.1335 range during the session, off levels as high as 4.1865 in mid-December, according to DZHI data.

The dollar/Indonesian rupiah ended at 14,479 on Tuesday, after trading in a 14,375 to 14,479 range during the session, according to DZHI data.

 

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