The US dollar index fell overnight by 0.30% to 92.82, with lower 10-year yields greenlighting the restart of the great dollar rotation. That has continued today, with the dollar index falling another 0.20% to 92.66, just shy of major support at 92.50. A daily close below 92.50 signals the start of the next leg down in the US dollar after a month of noisy range-trading.
Across currencies markets, a notable group of major and Asian regional currencies are now at or near recent highs versus the US dollar. EUR/USD has risen 0.15% this morning, within shouting distance of monthly resistance at 1.1920. Having led the dollar sell-off initially, a close by the euro above that level is a strong bullish signal. The same pattern is being played out with CHF, CAD, JPY and AUD, which are all poised to break higher versus the dollar.
The only laggard is the New Zealand dollar, weighed down by the return of Covid-19 and the threat of negative interest rates. The kiwi has sunk to 0.6540 today. A loss of 0.6500 signals that the bird will remain flightless for some time yet. I also note the AUD/NZD has rallied above 1.1000 for the first time in over a year, signaling more gains for the cross to 1.1200, and more associated selling pressure for the kiwi itself.
Except for the Indonesian rupiah, for reasons explained earlier, regional Asian currencies retesting their highest levels in recent times versus the dollar. USD/CNY, USD/CNH, USD/SGD, USD/PHP and USD/MYR have all moved to mid-March lows, the great capitulation sell-off. USD/THB is lagging but on the same clear trajectory. The hunt for yield and the global recovery story are back with a vengeance, despite heavy short-term selling positioning in the US dollar. A move by EUR/USD trough 1.1920 this afternoon will greenlight further gains by regional Asia.