After some significant moves on Tuesday, currency markets had a more consolidative look about them overnight, although the US dollar continued grinding higher. The dollar index rose 0.21% to 92.52 and is now testing its 200-DMA, signalling further potential gains to 93.00 initially.
Amongst the majors, the British pound continues to suffer AstraZeneca (NASDAQ:AZN) fallout, slipping 0.47% to 1.3700 as of this morning. It targets 1.3600 initially, and if EUR/USD fails at 1.1800, its next target will be 1.1600 in the week ahead. The AUD/USD has closed below its 100-DMA, at 0.7608 today, adding another bearish headline to a cloudy technical picture. Likewise, NZD/USD closed under important support at 0.7000 and faces more losses to 0.6800 in the near-term.
The PBOC has set the USD/CNY fix slightly higher at 6.5282 today, and the CNY continues to outperform relative to the G-10 currencies. That has spared the rest of Asia’s blushes, although regional Asian currencies retreated overnight versus the greenback and have eased again today. USD/IDR is approaching 14,500.00, and a rise through that level will weigh on Indonesian assets and almost certainly spur intervention by the central bank. USD/THB is also on the move and faces a test of significant resistance around 6.5500, but the rest of Asia is content to track the CNY, with the Indian rupee showing surprising strength. The Philippine peso may face renewed selling pressure if, as expected, the central bank leaves rates unchanged at 2.0% this afternoon.
Although Asian EM is holding up well in the face of dollar strength, a move hires in bond yields next week after President Biden releases his infrastructure package details will ramp up the pressure on local currencies.
The US dollar strength in general, coming even as US yields ease lower, is indicative of safe-haven flows and reflects a nervousness in international markets that is not yet wholly apparent in other asset classes.