Greenback Trades Higher In Asia Before Momentum Stalls In Europe

Overview: The attack on Saudi Arabia's largest crude terminal reverberated through the capital markets, where sentiment was already fragile, despite the lack of disruption. Brent rose to nearly $71.40, and April WTI to almost $68 extended their gains for the fourth consecutive session before being fully unwound. Most equity markets fell in the Asia Pacific region, lead by more than a 2% decline in China and nearly as much in Hong Kong. Australia and Singapore bucked the regional trend. Europe's Dow Jones Stoxx 600 is rising for the first time in three days, led by financials and industrials. Utilities and consumer staples are drags.US futures are 0.7%-1.6% lower. The US 10-year yield is knocking on 1.60%, while core European yields are slightly firmer. Peripheral yields are a little softer. The market anticipates that ECB data will show stepped-up purchases last week. The US dollar is riding higher against nearly all the world's currencies today. Among the majors, the Antipodean and Swiss franc are off 0.5%-0.75% to lead the move, and the euro slide extended for a fourth session, during which time it has slipped more than two cents to around $1.1865.The JP Morgan Emerging Market Currency Index is also off for the fourth session and is at its lowest since before last November's US election. Gold began the session higher and tested $1714 before being sold back toward the pre-weekend lows below $1690.  

Asia Pacific

Japan's January current account surplus was about half of what economists had expected (JPY647 bln vs. JPY1.253 trillion). The main culprit was the swing in the balance-of-payments trade balance from a JPY695 bln surplus in December to a JPY130 bln deficit in January. Japan also reports some country-specific bond flow data with its current account figures. The notable development was that Japanese investors reduced their buying of European bonds. They bought the least amount of Gilts since at least 2005 and were net sellers of German Bunds. There was a sharp decline in the purchases of Italian and French bonds. Separately, Japanese investors bought the least Australian bonds since last February. Also, of interest, China sold about JPY808.5 bln of Japanese bonds, the most in seven years.  

A year ago, China's economy saw the worst of the economic hit from the pandemic. The year-over-year comparison is distorted by the experience. January-February 2020, China's exports fell 17.4%. Here in 2021, they are up 60%, and imports rose by 22%. The trade surplus for the first two months of this year is a whopping $103.25 bln, and the US accounts for nearly half (~$51.3 bln). Separately, citing pests, Beijing announced a ban on imports of pineapples from Taiwan. It usually buys the bulk of Taiwan's crop. For nearly two decades, China has been a strong buyer of Taiwan's agriculture exports. Given Beijing's penchant for using trade as a way to express its disapproval, the situation will be closely monitored.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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