The dollar teetered near milestone lows yesterday, after a triple blow of retreating yields, soft United States economic data and a dip in safe-haven demand exerted broad selling pressure.
Against the euro, Australian dollar, pound, Swiss franc and yuan, it is poised to retest multi-month or multi-year troughs made earlier in the month, though moves in morning trade were small as today's release of the Federal Reserve minutes loomed on the horizon.
The euro last sat at US$1.1874, just below a recent two-year high of US$1.1916. The Aussie dollar was steady at US$0.7213 and close to an 18-month top of US$0.7242 hit on Aug 7.
Investors heaved relief over a delay in the review of the US-China trade deal last week, which has left the agreement standing and reinforced a belief that the trade relationship can hold even amid conflict on multiple other fronts.
Adding to the positive mood was a fresh rally in tech stocks, which together with a pullback in US yields and a weak reading in a US manufacturing survey, has many traders sticking to their bearish convictions on the dollar.
Net bearish bets on the US dollar grew to their largest since May 2011 last week, and spot trade in recent days suggest the position has only grown further since. "Extended short dollar positions risk a sharp pullback if the dollar downside stalls further, but for now, the negatives for the dollar are mostly still in place," said analysts at OCBC Bank.
"We are reduced to staying in the game while the music is playing."
OCBC called out soft data, the political impasse holding up US fiscal stimulus and a "limited appetite for interpreting Sino-US relations as being in an outright downward spiral" as backing the dollar's gloomy outlook.
Underscoring that view, the yuan sat at 6.9306 per dollar, within range of a five-month high of 6.9280, despite the Trump administration flagging a further tightening of restrictions against Chinese tech gear maker Huawei.
On the data front, the New York Fed's Empire State business conditions index tumbled to 3.7 this month from 17.2 last month – far lower than the 15 points forecast by a Reuters survey.
Delinquency rates for residential mortgages also posted the largest quarterly increase on record.
"A high delinquency rate for an extended period can impair the banking system," said Commonwealth Bank of Australia currency analyst Joseph Capurso.
"An impaired banking system could hold back the US economic recovery like it did in the aftermath of the (2008 crisis)," he said.
The Japanese yen rose back past 106-per-dollar to 105.88 after a 2.6 basis point drop in benchmark US 10-year government bond yields oveRead More – Source