Dollar Gains Initially Extended, But Now Awaits US Leadership

Australia's flash PMI showed a bigger improvement in services than manufacturing. The manufacturing PMI ticked up to 57.0 from 56.9, while the service PMI jumped to 56.2 from 53.4. This allowed the composite reading to improve to 56.2 from 53.7. Separately, New Zealand reported the February trade balance swung into surplus (~NZD181 mln) after January saw the largest deficit (~NZD647 mln) since last September. Exports rose, and imports fell.  

For the past five sessions, the dollar fell below the previous session's low against the Japanese yen. That pattern may be broken today as the greenback holds above yesterday's low (~JPY108.40). However, for the fifth session, the dollar has not risen above the previous session's high. Yesterday's high was a tad above JPY108.85. The Australian dollar slumped nearly 1.6% yesterday, its largest drop this month. The losses were initially extended to around $0.7585 and matched the February 5 low, which is about a fifth of a cent above the year's low. It has moved back into yesterday's range (low was a little above $0.7615). It may take a move above the $0.7650 area to improve the technical tone. The greenback rose to its best level against the Chinese yuan in about two and a half weeks near CNY6.5270. The high for the year was set on March 9 near CNY6.5440. The PBOC set the dollar's reference rate at CNY6.5228, a bit weaker than expected, and that may signal a small protest to continued yuan weakness. The yield on China's 10-year benchmark bond eased by a couple of basis points, and at 3.18%, it is the lowest since February 3.  


Germany and France reported better than expected flash PMIs, but with new lockdowns amid a third wave of the virus, the impact was marginal. The German manufacturing PMI rose to 66.6 from 60.7. The Bloomberg survey anticipated a small decline. France's manufacturing PMI rose more than expected. It rose to 58.8 from 56.1. However, while the French service PMI is still in contracting territory below (47.8 vs. 45.6), Germany's service PMI rebounded above 50 (to 50.8) for the first time since last September. The net effect is that the German composite PMI stands at 56.8, a new cyclical high. France's composite rose to 49.5, its best in Q1 and matches the December level. The eurozone's preliminary composite jumped to 52.5 from 48.8. It stands at its best level since last July's peak (54.9). 

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Read more by Marc on his site Marc to Market.

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