The US dollar has reasserted itself once again on the back of last week's surge in USD/JPY. USD now appears to be firmly anchored above JPY 102, after bouncing off this key support level earlier this morning. Buy the dip seems to by the story with pair, as USD/JPY sales are met with fresh buyers.
But its not just the Yen which is the dollar's latest victim. While much talk is afoot about the 'realignment' of AUD, the Aussie dollar's dip below parity has coincided with broad dollar gains against majors and exotics alike. EUR/USD has dipped below 1.29 and its now settling into a 1.28-50 range. Sterling is on the back foot again, but appears to have found short-term support at 1.52. USD/CHF is trading in concert with EUR/USD. Many expect a retest of .99 or even parity.
On the EM front, USD/ZAR is pushing higher, and appears poised to test the crucial 9.30 level which was the peak of the last rally. Further labor unrest and low commodity prices is also weighing heavily of ZAR. Asians are down with the Yen and AUD. USD/INR is trading higher in the 54.50-80 range. USD/THB, which plunged earlier this year, is back near 30. Finally, KRW has been under heavy pressure on speculation that the BOK, which cut rates along with the RBA last week, may intervene on FX markets to protect Korean exports against a weaker Yen. Finally, USD/MXN is pressuring 12.30, especially in light of the low expectations for Q1 GDP due out Friday. The finance ministry expects annualized GDP to come in at a paltry 1 percent.
In short, the greenback is consolidating its gains against everything. While I am tempted to pat myself on the pat for buying USD/ZAR last week, it appears that the real theme is strong USD dollar. Virtually any long USD is well in the green for the week. A win is a win, but broad dollar strength, not internal fundamentals of individual currencies, appears to be setting the tone the FX market.
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