Dollar goes positive for year before Fed
meeting
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[May 01, 2018]
By Marc Jones
LONDON (Reuters) - The dollar broke into
positive territory for the year on Tuesday and bond yields were creeping
higher again, as rising oil prices fueled bets that the Federal Reserve
will flag more U.S. rate hikes this week.
May Day holidays in many centers across Asia and Europe meant trading
was sparser than usual, though there was more than enough news flow to
keep those that were open occupied.
The mood at the margins was upbeat after U.S. President Donald Trump
extended steel and aluminum tariff exemptions for Europe, Canada and
Mexico for another month.
There were nerves too. Disappointing British manufacturing and consumer
lending figures added to the recent run of European data, worries about
Iran's nuclear deal were keeping oil up, while Apple's results were due
later following recent whispers of weak iPhone demand.
It was the dollar though making the running as it turned positive for
the year before a two-day Fed meeting expected to pave the way for
another two or even three U.S. rate hikes this year.
London's greenback bulls took advantage of the reduced trader presence
in the rest of Europe to push it to almost $1.20 per euro and make good
ground against the Swiss franc and the data-damaged pound.
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"Provided the Fed conveys a steady-as-she-goes approach and it isn't
seen to be back tracking - and there is no reason from the data why it
should - the dollar should be consolidating and pushing on from this
level," said Bank of New York Mellon senior currency strategist Neil
Mellor.
He added that the key change has been the move of the U.S. Treasury bond
yield to 3 percent last week.
It was nudging up at 2.96 percent on Tuesday, which also left the gap
between U.S. and German 10-year benchmark bond yields just off its
widest level in nearly three decades. [GVD/EUR]
"It has been a bit like a dam bursting," Mellor said of the Treasury
move.
For Europe's stocks followers, only London's FTSE and Denmark's bourse
were open.
They were both higher, thanks to the boost to exporters of lower
domestic currencies and relief that Trump had postponed steel and
aluminum tariffs on the EU, Canada and Mexico and given permanent
exemptions to several other allies.
U.S. stock futures were steady and in Asia, Japan's Nikkei closed up 0.2
percent while Australian shares hit seven-week highs as its monster
metals sector breathed easier.
Apple’s quarterly results are due after Wall Street closes and will be a
big focus after several weeks of speculation about ebbing smartphone
demand based on selective reports from companies in its supply chain.
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![](../images/050118pics/news_n31.jpg)
An investor looks at an electronic board showing stock information
at a brokerage house in Nanjing, Jiangsu province, China April 16,
2018. REUTERS/Stringer
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Technology sector results so far – at least from the likes of
Amazon, Alphabet, Microsoft, Samsung and SAP – have broadly beaten
forecasts for Q1 and the overall aggregate U.S. earnings growth is
tracking seven-year highs of almost 25 percent.
"Earnings have been really strong so far. Microsoft and Amazon had a
bumper quarter. The only concern has been Apple," said Hirokazu
Kabeya, chief global strategist at Daiwa Securities.
SUBMERGING MARKETS
The stronger dollar was felt widely across commodity markets and the
emerging economies that are now borrowing record amounts of debt in
the U.S. currency, data from the Bank for International Settlements
revealed this week.
MSCI's emerging market index fell 0.4 percent with Russian
dollar-denominated stocks chalking up some of the biggest losses and
currencies and bonds staying under pressure too. [EMRG/FRX]
Brent oil prices eased off four-month highs of just over $75 a
barrel set on Monday on worries that U.S. President Donald Trump may
pull out of the 2015 Iran nuclear deal and thereby bring back
sanctions on its oil output. [O/R]
The White House said on Monday that information provided by Israel
on Iran's nuclear program had provided "new and compelling details".
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A high-level U.S. trade delegation will be in Beijing for meetings
later this week, amid lingering worries about a possible trade war
between the world's top two economies.
Copper, which is highly attuned to China's economy, hit its lowest
in three weeks at $6,752 a tonne, accelerating downwards after it
broke below its 200-day moving average at $6,800.
(Reporting by Marc Jones; Editing by Andrew Heavens)
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