US Yields Stabilize After Falling To Three-Month Lows

The US appears to be stepping up pressure on the UAE to drop Huawei and replace it. It appears to be threatening to drop the country from the F-35 jets and drones (~$23 bln) that have been ordered for delivery in 2026-2027. 

China has not been invited to the G7 meeting, but it features prominently. Having a common rival is a key to the reassertion of US leadership. Efforts to re-investigate the origins of the covid pandemic are obviously not necessary to combat the virus or tighten lab security broadly, which was seen as lax. The origins of the so-called Spanish flu are still not fully agreed upon. In part, the push to keep pressure on China. Tax reform is another element as it seeks to reduce the competition between major countries. The (2011-2017) Deputy Secretary of the OECD that oversaw tax issues claimed the effort is "incomplete" as the more equitable allocation of tax revenues applies to only 100 companies.  

Despite the drop in US yields this week, the dollar has been trading sideways against the Japanese yen. It remains in a tight range: JPY109.20-JPY109.80.There is a $960 mln option at JPY109.80 that expires today. It is holding around the middle of the range in Europe (~JPY109.50), where it finished last week. The Australian dollar is trading a marginal new high for the week today (~$0.7775). It has been confined to about half a cent range, finding support around $0.7720. It settled around $0.7740 last week. The Chinese yuan is slightly firmer today and on the week. Evaluating official efforts on the yuan is difficult because the objective is not clear. However, if the goal was to stabilize it around current levels, it succeeded. The dollar finished last month around CNY6.37 and is settling this week just below CNY6.39. Since Beijing moved to raise the reserves for foreign exchange deposits and protested through the daily fixings, the dollar peaked near CNY6.41. According to the Bloomberg survey, the dollar's reference rate was set at CNY6.3856 today, a little stronger than the median expectation of CNY6.3847.  

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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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