The Euro Approaches $1.19 As Corrective Pressures Persist And US 10-year Yield Slips Below 1.65%

Overview

The heavier tone for the dollar that emerged last week persists.  The euro is testing the 200-day moving average (~$1.1890) since breaking below it last month for the first time since May 2020.  The greenback has steadied after falling to an eight-day low against the yen near JPY109.60.  The dollar-bloc currencies are trading heavier.  Emerging market currencies are mixed, leaving the JP Morgan Emerging Market Currency Index little changed after pushing higher for the past two sessions.  The big mover is the Indian rupee, which is off more than 1% on news of a formal bond-buying program.  The QE lifted Indian equities by more than 1%, and the benchmark 10-year yield fell by around four basis points.  Asia Pacific equities mostly advanced, though Chinese and Hong Kong shares fell.  Europe's Dow Jones Stoxx 600 is consolidating near record highs set yesterday.  US equities futures are a little firmer after unable to hold on to gains yesterday.  The US 10-year yield slipped below the 20-day moving average (~1.65%) for the first time since early February to trade at an eight-day low.   European bond yields are slightly softer.  Gold stalled yesterday near $1745 and has been unable to get closer to the important cap around $1750.  It has backed off but is holding above yesterday's low, near $1727.  May WTI remains inside the range set on Monday (~$57.65-$61.50), and it could be the first day since February 12 that remains below $60 (OIL).  

Asia Pacific

China's reserves fell more than expected last month.  The official tally shows a decline to $3.170 trillion from $3.205 trillion.  The dollar rallied, and bonds sold off, suggesting valuation accounts for the bulk of the move.  It was the third consecutive month that the dollar value of its reserves fell, and the nearly $35 bln declines were the most since last March's $46.1 bln drops.  While many reports focus on the capital inflows into China, official data underscores the significance of capital outflows, which officials use to offset the inflows.  They lack the visibility of the inflows but are a key mechanism at work.  

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Read more by Marc on his site Marc to Market.

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