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16 Aug 2013
Flash: US yields to support dollar - BTMU
FXstreet.com (Barcelona) - Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ, Ltd said, "Beyond the near-term position adjustment, higher relative US yields should help to support a stronger US dollar".
Key Quotes:
"The yield on the 10-year UST climbed to a fresh high yesterday just above 2.8% triggering the sharpest sell off in the US equity market since late June highlighting that the impact of Fed QE tapering may not yet be fully discounted".
"With US yields also dragging other global yields higher as well it is resulting in more challenging external financing conditions placing further downward pressure upon currencies from countries with high current account deficits heavily funded by fixed income portfolio inflows such as Indian rupee, South African rand, and Turkish lira".
"Within the G10, the Australian and New Zealand dollar are the most at risk from less favourable external financing conditions although easing investor pessimism over the growth outlook in China is helping to provide support in the near-term".
"According to our valuations, the New Zealand dollar is the most overvalued G10 currency creating the greatest scope for an adjustment lower as the Fed begins to tighten monetary policy in the years ahead assuming the US recovery remains on track".
Key Quotes:
"The yield on the 10-year UST climbed to a fresh high yesterday just above 2.8% triggering the sharpest sell off in the US equity market since late June highlighting that the impact of Fed QE tapering may not yet be fully discounted".
"With US yields also dragging other global yields higher as well it is resulting in more challenging external financing conditions placing further downward pressure upon currencies from countries with high current account deficits heavily funded by fixed income portfolio inflows such as Indian rupee, South African rand, and Turkish lira".
"Within the G10, the Australian and New Zealand dollar are the most at risk from less favourable external financing conditions although easing investor pessimism over the growth outlook in China is helping to provide support in the near-term".
"According to our valuations, the New Zealand dollar is the most overvalued G10 currency creating the greatest scope for an adjustment lower as the Fed begins to tighten monetary policy in the years ahead assuming the US recovery remains on track".