Dollar remains stuck in neutral gear

US dollar steady

Momentum has waned in the bearish US dollar trade as well. Although the dollar index faded by just 0.13% overnight, it has recouped that loss in Asia this morning, rising back to 92.47. Suspected intervention by South Korea and Thailand to buy US dollars seems to have lifted the greenback modestly higher in general in Asia. With little room to move on interest rates, and with some very public comments about currencies, we expect more of the same to continue.

That has left major and Asian currencies slightly lower in Asian trading, but in the bigger picture, consolidating recent gains, notably among the commodity and regional Asian currencies. The PBOC set CNY higher again today at 6.5484, its highest since June 26th, 2018, for trivia fans. With the PBOC content with CNY appreciation, the rest of Asia will continue to move in lockstep, and regional central bank intervention to buy dollars is merely a smoothing operation and not a line in the sand.

High iron ore and copper prices continue to support the Australian and Canadian dollars. However, the New Zealand dollar continues to be the outperforming commodity-group currency, after the RBNZ held rates unchanged. China’s silent trade war with Australia continues to have zero effect on the currency, much to my surprise. Still, today’s employment data suggests little to no impact on the real economy either.

Among the majors, the Japanese yen and Swiss franc are quiet underperformers, boosted perhaps by subtle haven flows. Sterling remains the highest likelihood major to produce some volatility. A Brexit trade agreement will probably be worth a few hundred points of topside immediately, even though markets have been pricing in zero chance of a no-deal for some time.

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