NY Session: Dollar Higher as Treasury Yields Soar

The US dollar remained firmer against all of the G10 currencies as U.S. treasury yields soared while markets continued to adjust their expectations of Fed policy after yesterday’s relatively upbeat FOMC statement. The dollar gains of late now appear to be more a function of higher yields as opposed to risk-on/risk-off sentiment. In the past, higher treasury yields were seen along with risk appetite and a weaker buck. Price action today saw stock markets mixed to relatively flat with the DJIA finishing up by about +0.13% while the S&P 500 closed the session lower by about -0.12%, however U.S. treasury yields broke their ranges and spiked higher with the 10-yrs rising above the 100-day SMA for the first time since early July to current levels of around 2.277%. Commodities also tumbled on the back of a stronger buck with the precious metals gold and silver currently lower by -1.88% and -3.74% respectively. Gold remains in a long-term upwards trend with significant support coming in just below the $1600 level that can be seen by connecting the 2008 lows with July 2010 lows.

Economic data released included the U.S. import price index which rose by +0.4% m/m in Feb. from the prior 0.0 and was higher by +5.5% on a yearly basis. 4Q current account balance figures were also released and disappointed with a widening of the deficit to $-124.1B from the prior -$107.6B (cons. -$115.0B).

The Norwegian krone underperformed after the Norges Bank unexpectedly cut its policy rate by 25bps to 1.50%. Governor Olsen noted NOK strength and the downturn abroad as putting pressure on growth and keeping inflation low. His commentary was dovish as he said that the “current outlook suggests that the key policy rate may remain low longer than projected earlier”. The NOK plunged after the central bank announcement with EUR/NOK surging to test the 55-day SMA around 7.59. Despite the rebound, the pair remains near historically low levels as it hit 9-year lows earlier this month.

On the data front for the upcoming Asia/Pacific session is the Feb. business NZ PMI, March ANZ consumer confidence, Australian consumer inflation expectations for March, Feb. new motor vehicle sales, and Japan releases its weekly securities investments data.