Dollar Firmer Amid Global Growth Concerns
NEW YORK (BBH FX Strategy) -- The U.S. dollar is broadly firmer amid rising concerns about global growth. Japan fiscal year-end repatriation flows may be playing a part in yen gains, but there appears to be upward yen pressure coming from the EUR and AUD crosses too. Immediate support is seen near the recent low near 82 followed by the March low near 80.60.
A widening of periphery spreads and negative news developments are weighing on the euro ahead of the North American open. Portuguese yields are higher, with the 10-year up 7 basis points after Fitch said Portuguese banks are on shaky ground.
Japan and the YenRecent yen strength is notable. There has been talk of FY-end repatriation flows in recent days, but other developments are in the mix. The Minister of Finance said policymakers will extend foreign-exchange-market monitoring to June 30. We note that there were no concerns voiced about volatility when dollar/yen was gapping up from 76 to 84 in a little over a month, but now official concerns are rising about the pace of the yen's recent advance. The ruling Democratic Party of Japan has drafted a plan to double the sales tax to 10% by 2015 from 5% after fierce debate, and the cabinet will submit the bill to the ongoing ordinary Diet session. Some opponents in DPJ and Shizuka Kamei, the leader of People's New Party (the ruling coalition partner), strongly disapprove of the bill and threatened to break away from coalition.
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