The Yuan Extends Gains, While Sterling's First Close Above $1.42 In Three Years Goes For Nought

Overview: The recovery of the US 10-year yield, so it is flat on the week near 1.61% coupled with month-end demand, is helping the US dollar firm. While the yen is bearing the burden on the week, with a 0.8% loss, the Antipodeans are leading the downside on the day. Although the New Zealand dollar has not maintained the momentum spurred by the more hawkish RBNZ, it is holding on to about a 1% gain for the week to lead the majors. The Chinese yuan rose to new three-year highs today, and its 1.1% gain on the week is the most since last November. While the JP Morgan Emerging Market Currency Index is trading heavily today, it is snapping a two-week decline. The yen's weakness helped lift the Japanese shares, and the Nikkei gapped higher, and its 2.1% gain was the most in ten weeks. The largest equity markets in the Asia Pacific region were stronger, save China and Hong Kong. European shares are firmer, and the Dow Jones Stoxx 600 is reaching new record highs with the seventh consecutive advance.US futures indices are trading 0.2%-0.4% better.US and European benchmark 10-year yields are little changed. Industrial commodities in China, including iron ore and steel rebar, are closing the week on the upside, though copper is trading lower. Lumber futures are bringing a four-week decline into today's session. Oil prices are higher, and July WTI is rising for the sixth consecutive session. It reached $67.45 in Asia, a new high, before consolidating. Gold is also consolidating after being unable to close above $1900 despite intraday penetration for the past two sessions.  

Asia Pacific 

The Japanese economy continues to struggle after contracting in Q1. The formal state of emergency is expected to be extended from the end of this month until June 20 in seven prefectures. Japan reported weaker than expected employment data for last month. April unemployment rose to 2.8% from 2.6%, and the job-to-applicant ratio slipped to 1.09 from 1.10. Next week Japan reports April industrial production and retail sales, which may capture the economic challenge. Exports should help underpin industrial output, but domestic demand is likely weakened. April retail sales are anticipated to have fully offset March's 1.2% gain.  

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Read more by Marc on his site Marc to Market.

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