Money Markets
Greenback no longer one way bet for investors
Despite the losses of the dollar, it remains 7.5 per cent above its record low against the euro at $1.6040 set in July, 2008. Photo/FILE
The general theme remained profit-taking and a shift to safe-havens, notably the short end of the US Treasury market where yields had dropped to near zero, and briefly went negative last week.
That flow to US assets was helping underpin the US dollar and should linger through to the new year.
“It worries me that two-year yields are trading as they are plus bill rates went negative and gold is bid, bid, bid,” said Robert Rennie, chief currency strategist at Westpac.
“Makes me think there is a huge flight to quality going on that hasn’t hit forex yet...perhaps a bit of a warning sign.”
The trend continued on Monday, albeit slowly with Tokyo on holiday.
The euro edged down to $1.4845, from Friday’s $1.4860.
Support was seen around Friday’s $1.4800 low and the 55-day moving average at $1.4784, while resistance came in at $1.4935.
The dollar was little changed at 88.88 yen, from 88.97 in New York, but remains in a gradual downtrend that stretches back four weeks now.
Trade was likely to be thin all week given US markets will be shut on Thursday for Thanksgiving, and the lack of liquidity could lead to volatile moves.
The US diary included existing home sales on Monday, revised GDP figures on Tuesday and the minutes of the Federal Reserve’s last policy meeting the day after.
Policy statement
Analysts at Barclays believe the minutes should show the Fed’s reference to resource utilization and inflation in its policy statement was intended to underline its commitment to keeping rates low.
“This language was not meant to signal that the extended period phrase would soon be removed,” they said in a note to clients. “We expect the FOMC’s updated economic projections to continue to show moderate economic growth and modest inflation.”
The greenback was also supported as banks parked funds in short-term, liquid safe-haven assets such as US government bonds ahead of book closings at the end of this month and next.
Rates on two-year Treasury notes have been falling steadily and briefly broke beneath the year’s low of 0.68 per cent on Friday.
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