Comment: US recap: Dollar reverses losses post-CPI, Daly, 30-yr flop, sales next
10/08/2023 19:14
Aug 10 (Reuters) - The dollar index began the NorAm session on the back
foot and fell almost to last Friday's lows after near-forecast U.S. CPI briefly
yanked Treasury yields lower, but the dollar and yields rebounded sharply,
erasing Thursday's losses.
The expectation and confirmation that CPI all-items and core would again
rise just 0.2% from the previous month initially sent Treasury yields sharply
lower, extending the dollar's preceding risk-on driven losses versus the euro
and most other currencies.
But the dollar's recovery with Treasury yields, aided later by hawkish
comments from San Francisco Federal Reserve Bank President Mary Daly morphed
into a de-risking event favoring the dollar after Treasury yields surged further
on a sloppy 30-yr Treasury auction.
EUR/USD gave up all of its earlier gains, while USD/JPY swung from fresh
intraday lows toward 2023's highs.
The CPI data barely budged already low expectations for a further Fed hike.
USD/JPY's 0.63% advance was supported by Japanese wholesale prices falling
to their lowest since March 21 and obviating the need for the BoJ or MoF to
stand in the way of yen weakness.
EUR/USD earlier Thursday traded to its highest since July 27. The euro was
helped by the early risk-on flows and unwinding of bank sector losses that were
triggered by a windfall tax plan that was subsequently downsized.
Risk-sensitive sterling's early gains became a 0.3% loss as risk turned off.
Sterling already dogged by the weakest RICS house price balance since 2009 and
worries the BoE's final rate hikes may be followed by an economically painful
slow retreat that may offset sterling support from Fed rates seen falling
further below BoE rates next year.
EUR/JPY nearly hit its highest in 15 years. That as the BoJ's policy rate
remains at -0.1% and its new hard cap on 10-year JGB yields at 1% was in no way
threatened by the post-BoJ meeting peak of 0.658% and last at 0.595%. Scant
competition for the ECB's current 3.75% rate or 10-year bund yields at 2.5%.
AUD shed its earlier gain. CNH fell 0.2%, still daunted by China's
sputtering recovery and friction with trading partners.
Focus now shifts to Tuesday's U.S. retail sales report.
For more click on FXBUZ
(Editing by Terence Gabriel
Randolph Donney is a Reuters market analyst. The views expressed are his own.)
((Randolph.donney@thomsonreuters.com))