U.S. Dollar Remains Under Pressure

The greenback continued on its downward path overnight and has weakened further in Asia. The dollar index has fallen by 0.30% to 91.80 today, after the PBOC’s firm CNY fixing. The dollar index is now below its 92.00 support region and targets further losses to 91.00 in the days ahead.

In the G-10 space, the EUR/USD has climbed 0.40% today to 1.1990, a 2-year high. Resistance lies nearby at 1.2020, with further gains possible to 1.2150 if broken in the days ahead. GBP/USD has climbed 0.30% to 1.3410, a near one-year high today and now targets further gains to 1.3500 initially. AUD/USD and NZD/USD made further gains overnight and have risen 0.40% this morning.

If pro-cyclical G-10 currencies have outperformed, the same can also be said for Asian currencies. The CNY had another strong fixing this morning, with the PBOC seemingly quite comfortable with recent strength. The 6.8498 fixing rate saw USD/CNY fall through 6.8400 today, boosted by robust China data. USD/CNY now targets 6.8000 and recent outperformers such as the ringgit, baht and Singapore dollar, are likely to follow suit. China’s outperformance is adding another driver for a weaker US dollar.

The Indian rupee has ignored an India/China clash in the Himalayas overnight, and shocking GDP data yesterday to post further gains this morning. Having broken support at 74.00 last week, USD/INR is testing support around 73.00 this morning, targeting further losses to the 70.00 area, much to the Reserve Bank of India’s relief. If nothing else, the story of the INR is the story of a weak US dollar and highlights the momentum the weaker dollar trade has. It is also a boon for Asia, allowing central banks around the region, almost all of whom run a soft dollar peg, room to ease monetary policy if necessary.

With no sign of the US dollar’s momentum waning in the short-term, Europe should see further appreciation versus the greenback, with pro-cyclical currencies outperforming.

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