U.S. Dollar Well Above Fed-Inspired Lows

The dollar edged lower in early Asian trade on Friday but remained well above this week’s lows plumbed after the Federal Reserve’s dovish stance on interest rates sent the greenback tumbling.  The dollar’s plunge on Wednesday after the Fed cut its inflation outlook and its growth forecast did not alter the long-term view that divergent monetary policy expectations will bolster the U.S. currency in the months ahead.

While market players’ consensus expectation for the U.S. central bank’s interest rate hike have shifted, the overall trend has not. A majority of Wall Street’s top banks now see the Fed holding off until at least September before raising rates, with odds fading for a June hike, a Reuters poll showed.  “Our core views have not changed across commodity and FX markets: we remain bearish on commodities and bullish on the USD in the G10 and EM areas,” strategists at RBC Capital Markets said in a note to clients.

“In fixed income, we have shifted from bearish to a neutral stance for U.S. 10-year yields, preferring to step aside for better perspective after multiple whipsaws have chopped us up over the last three weeks,” they added.  Undermining the greenback, U.S. Treasury yields wallowed not far from multi-week lows struck after the Fed meeting. The yield on benchmark 10-year notes US10YT=RR slipped to 1.963 percent in Asian trading from its U.S. close of 1.976 percent on Thursday.


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