Narrow Ranges In FX Prevail Amid Month-End Considerations

Overview: Dollar demand linked to the month-end gave the greenback a bit of a reprieve, helped by firmer bond yields. Some momentum players may have been forced out of the euro and yen when the $1.22 and JPY109 levels yielded. However, follow-through dollar buying has been limited, and it has come back a little softer but broadly so. The US 10-year yield has steadied after the 1.55% level held for the second session, though the upside has been limited to a few basis points. European benchmark yields are narrowly mixed after the recent declines, encouraged ostensibly by the doves pushing back against a slowing of ECB bond purchases next month. Asia Pacific equities were mixed. Japan, South Korea, Hong Kong, and Taiwan markets eased, while China, Australia, and India rose. The Nikkei fell for the first time in six sessions, led by chemical companies and banks, amid concern that the formal emergency will be extended for a few more weeks in at least Tokyo and Osaka. Of note, the easing of social restrictions sent the Philippines stock market up 5.1% to bring the three-day advance to 8%., and lifting the peso the most among emerging market currencies today. European shares are edging higher, and the Dow Jones Stoxx 600 is trying to extend its advance for a sixth session, but this week's gains have been minor, less than 0.3%.US futures are a little heavier. Industrial commodities, including iron ore and steel rebar, continued their downside correction, while lumber prices fell for the third session in the US yesterday. Oil is consolidating in narrow ranges, with the July WTI in about a 30-cent range on either side of $65.80.Gold stalled yesterday after reaching almost $1914, the highest level since mid-January. It is holding above $1890, but the upside momentum has not been rekindled.  

Asia Pacific

The media seemed to emphasize that the US Trade Representative Tai had a phone call with China's Vice Premier Liu He yesterday. No meaningful details were reported, the information content nil. However, the real signal came from the administration's head of the "Indo-Pacific" region, Campbell, who announced that the era of "engagement" was over and a new set of strategic priorities was emerging. The dominant paradigm, he declared, was one of competition. Meanwhile, the bill being debated in the US Senate that seeks to bolster and modernize US industry, wrapped in cold-war-like language that it is needed to answer China's competitive threat, is running into Republican opposition. Several GOP Senators want to make amendments to the bill, which Majority Leader Schumer wants to complete before the weekend.  

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Read more by Marc on his site Marc to Market.

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