The US dollar holds steady

Majors in holding pattern as US nonfarm payrolls looms

The US dollar contented itself with range-trading once again overnight, the index closing almost unchanged once again at 96.24, before slipping to 96.22 in a moribund Asian session. EUR/USD is steady at 1.1300, GBP/USD 1.3545, and USD/JPY at 115.85 in Asia today, barely changed from the New York close and with USD/JPY ignoring “watching FX closely” noise from the Japanese Ministry of Finance. Slightly firmer yields continue to limit the US dollar downside versus the major currencies, which appear to be in a holding pattern into the Non-Farm Payrolls. I await a dollar index break of either 95.50 or 96.50 for the next directional signal.

The AUD/USD and NZD/USD risk sentiment indicators both remained under pressure overnight, hinting that despite the calm seen elsewhere, nerves abound about the Fed tightening story and higher US yields. AUD/USD and NZD/USD finished around 0.805 lower at 0.7160 and 0.6750 where they remain in Asia. The risk is still skewed to the downside. USD/CAD bucked the trend overnight, CAD strengthening as USD/CAD fell to 1.2715, most likely dues to the 2.0%+ rally in oil overnight. It remains to be seen whether a sell-off under 1.2700 can be sustained.

Asian currencies are quiet today, edging slightly higher, but overnight weakened through some significant levels versus the US dollar. USD/KRW has climbed through 1200.00 to 1202.00. USD/PHP has risen 51.20 and USD/IDR to 14,400.00 approaching 14.500.00. USD/MYR ignored the rise in oil, climbing to 4.2100 before retreating to 4.2000. The Thai baht also joined them, weakening by over 1.0% as USD/THB trades at 33.57 today. The yuan and Indian rupee continue to outperform. For the rest, it will be interesting to see if their respective central banks step out of the shadows and start offering US dollars again. Their hands will be stayed ahead of the US data tonight, but next week could be a different story. Slowly but surely, the normalisation story by the Fed is seeping into weaker Asian FX, leaving regional central banks with a policy dilemma.

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