April 27, 2015
Indicative Interbank spot sell rates only as of 8:30 AM PST.
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The U.S. dollar is losing its luster among hedge funds and other speculative traders as investors become less certain about the outlook for U.S. interest rates. For the first time since August, futures data show that the greenback is no longer the currency speculators are the most bullish on, after being supplanted by the yen. A gauge measuring bullish dollar bets compared to the three-year average fell in the most recent week. The U.S. Dollar Spot Index, which tracks the U.S. currency against 10 major peers, has dropped 1.9 percent this month to 1,178.16 as of 11:21 a.m. in New York, set for the first monthly decline since June last year.
The euro weakened against most of its major peers as Greece stepped up efforts to reach an accord with creditors in time to avert a default. The shared currency erased losses against the dollar as the nation removed day-to-day responsibility for seeking the agreement from Finance Minister Yanis Varoufakis, after euro-area finance ministers last week pilloried his approach to bailout negotiations. The euro weakened versus most counterparts even as Greek bonds rallied with Spanish and Italian bonds amid optimism a revised approach may lead to a breakthrough. The euro added 0.2 percent to $1.0890 at 11:02 a.m. New York time.
Australia’s dollar looks to have survived a near-parity experience with New Zealand’s as the policy divergence between the two central banks disappears. The Aussie surged Monday to a one-month high of NZ$1.0316 after dropping to a record NZ$1.0021 three weeks earlier as Australian swap rates headed for their first monthly gain versus New Zealand’s since October. Markets are paring bets Reserve Bank of Australia Governor Glenn Stevens will drop the key interest rate next month to 2 percent after he said reductions may be less effective. The odds New Zealand will reduce the developed world’s highest benchmark from 3.5 percent are growing after its central bank ruled out increases last week and said it would consider cuts if growth and inflation pressures weaken further.
Speculators are losing interest in betting that the Japanese yen will fall further as the Bank of Japan shows no sign of adding stimulus to the economy when it meets this week. Net yen shorts, or bearish bets for the Japanese currency, decreased to 14,448 in the week to April 21, the least since October 2012. Speculative positions are still heading for a five-month run in favor of the yen in the longest such stretch since 1992. The yen weakened 0.2 percent to 119.25 per dollar at 6:17 a.m. New York time after depreciating as much as 0.4 percent. It has gained 4.9 percent against major peers this year, making it the best performer after the Swiss franc of 10 developed-nation currencies.
The Chinese yuan slid the most in a year on bets China’s central bank will boost the supply of funds by buying local government debt and cutting interest rates. The People’s Bank of China is considering direct purchases of notes issued by regional authorities from the market, Market News International reported Monday, citing people it didn’t identify. The authority reduced the amount of cash major banks need to set aside as reserves by 1 percentage point to 18.5 percent effective April 20. The PBOC may cut interest rates next month. The yuan declined 0.41 percent, the most since March 2014, to close at 6.2206 a dollar in Shanghai, China Foreign Exchange Trade System prices show. In Hong Kong’s offshore market, the currency slid 0.4 percent, the largest drop in three months, to 6.2215.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situation or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.