Dollar set for weekly loss as data, Fed cool bond market

  • 4/9/2021
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SINGAPORE (Reuters) - The dollar was headed for its worst week of the year on Friday as unexpectedly strong economic data in Europe, downbeat U.S. jobs figures and a determinedly accommodative Federal Reserve have prompted investors to unwind some bets on the greenback. The euro and yen are also poised for their largest weekly percentage gains in five months while the dollar index, which has fallen 1% this week, is parked near a two-week low at 92.066. “In short, the energy has gone out of the dollar’s first-quarter rebound, just as it has gone out of the bond sell-off,” said Kit Juckes, head of FX strategy at Societe Generale. Early in the Asia session, the euro sat above its 200-day moving average at $1.1916, just short of Thursday’s two-week top at $1.1928, while the yen pushed through its 20-day moving average to hold at 109.325 per dollar. The euro is up 1.4% against the dollar this week and the yen is up 1.3%. The euro has also risen more than 2% against the pound this week, bouncing from a one-year low of 84.70 pence on Monday to hit 86.81 pence in Asia on Friday amid growing concerns about Britain’s reliance on AstraZeneca’s vaccine. Sterling was an outlier against the dollar this week and has fallen half a percent to sit at $1.3744. The vaccine - developed with Oxford University and considered a frontrunner in the global inoculation race - has been plagued by safety concerns and supply problems. Australia and the Philippines limited use of the shot on Thursday, while the African Union dropped plans to buy it. On the data front, overnight figures showed U.S. unemployment claims unexpectedly rose - a bit of a dampener after a bumper payrolls report last week. European factory gate price rises, meanwhile, accelerated on the heels of surprisingly strong business activity growth. Fed leaders also again vowed to keep monetary policy super easy, even after some erstwhile positive signals from economic data. Chair Jerome Powell said policy wouldn’t shift until there was at least a monthslong string of such data, while board member James Bullard said the Fed should not even discuss changes until it is clear the pandemic is over. Treasuries rose on the jobs wobble and the Fed comments, pushing benchmark 10-year yields - which fall when prices rise - to a two-week low of 1.6170%. [US/] That further robbed the dollar of some of its recent allure, while a broadly upbeat mood in equity markets also lent some support to the risk-sensitive Australian and New Zealand currencies which headed to the top of recent ranges. The Aussie last sat at $0.7657, up 0.8% for the week, while the kiwi climbed to $0.7060, up 0.6% on the week. “Markets (are) re-thinking the U.S. dollar exceptionalism view,” ANZ Bank analysts said in a note on Friday. “Stronger U.S. growth should benefit all global cyclical assets, including the New Zealand dollar and Asian currencies, and this appears to be the theme now at play.”

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