Dollar Slips with Bond Yields

Rich Asplund -Barchart - 11 minutes ago

The dollar index (DXY00) on Thursday fell by -0.32%. Thursday’s U.S. economic news that showed weekly initial unemployment claims rose more than expected pushed T-note yields lower and weighed on the dollar. Also, position-squaring and long liquidation pressures undercut the dollar ahead of Friday’s U.S. monthly payroll report.

EUR/USD (^EURUSD) on Thursday rose by +0.29%. The euro Thursday posted moderate gains as a weaker dollar sparked short covering in EUR/USD. An upward revision to French Q4 private sector payrolls to up +0.2% q/q from the initially reported unchanged q/q was also positive for the euro.

USD/JPY (^USDJPY) on Thursday fell by -0.86%. The yen Thursday rallied on short-covering ahead of the results of the 2-day BOJ meeting on Friday. The consensus is for no change in BOJ policy, but Goldman Sachs and BNP Paribas say there is a risk that BOJ Governor Kuroda may surprise the markets at his last meeting as the head of the BOJ. A decline in T-note yields Thursday was also bullish for the yen.

Japan’s economic news Thursday was bearish for the yen. Japan Q4 GDP was unexpectedly revised downward to +0.1% (q/q annualized) from the initially reported +0.6% q/q, weaker than expectations of an upward revision to +0.8% q/q. Also, Feb machine tool orders fell -10.7% y/y, the biggest decline in nearly 2-1/2 years.

April gold (GCJ3) on Thursday closed up +16.00 (+0.88%), and May silver (SIK23) closed up +0.014 (+0.07%). Precious metals Thursday posted moderate gains. A weaker dollar Thursday supported metals prices. Also, the fall in the 10-year T-note yield to a 1-1/2 week low Thursday was bullish for precious metals. In addition, metals found support from the larger-than-expected increase in today’s U.S. weekly jobless claims report, which eases expectations the Fed will keep aggressively hiking interest rates. The continued liquidation of long gold positions in ETFs is bearish for gold prices after holdings of gold in ETFs fell to a new 2-3/4 year low Tuesday.
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