Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback down for third day after downgrade
The US dollar was down again for the third-straight session this week as worries about the recent downgrade from credit-agency Moody’s and the inability to pass President Trump’s budget hit bond markets.
The US ten-year bond yield neared 4.60% while the 30-year yield moved above 5.00% and hit the highest level since mid-2023.
The US dollar fell on the news as markets fretted about the US outlook.
So far this week, the USD’s biggest losses have been versus the Scandinavian and European markets – indicating the risk of a repatriation of investment funds. Safe havens like the Swiss franc and Japanese yen also gained.
The USD/SGD and USD/CNH returned to recent lows.
On the other hand, the Aussie and kiwi underperformed, with global growth worries weighing on these markets.
Fed in “wait-and-see” mode
During a conference on Tuesday, San Francisco Fed President Mary Daly stated that the Fed should maintain its “central position and then be prepared to move agilely — but not abruptly or quickly when we don’t need to because we don’t have enough information.”
Cleveland Fed President Beth Hammack, who was on the same panel as Daly and Raphael Bostic of the Atlanta Fed, emphasized that she is evaluating the outlook using possibilities, such as whether tariffs could lead to a one-time or more sustained spike in inflation.
According to Bloomberg, she stated, “At this time, I believe the best course of action we can take is to sit on our hands and really carefully go through the data.”
Looking at key component of the dollar index, the EUR/USD is now above average of 30-day trading range, whereas EUR/SGD is at 27% of the 30-day trading range.
The euro’s been stronger across markets with clear gains versus the AUD and NZD.
The dollar index has shown negative short term price momentum and weakness on the back of rising fears of US debt picture.
EUR buyers might look to take advantage of the current EUR positive momentum.
New Zealand trade could support kiwi
With export growth outperforming import growth, New Zealand jumped from a NZD12 million deficit to an April trade surplus of NZD1.4 billion, exceeding consensus estimates of $670 million.
Aircraft and machinery drove a slight 1.8% year-over-year increase in imports, while exports surged 25% year-over-year due to strong demand for dairy and fruits.
Exports to the US increased by 25%, China by 30%, and the EU by 34%. In the meantime, South Korea’s imports increased 30% and the US’s 66%.
NZD/USD is currently in a short-term uptrend with key support levels of 21-day EMA of 0.5910, and 50-day EMA of 0.5858 next.
USD/SGD, USD/CNY at lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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