Rising US bond rates, hawkish Fed officials and some month-end position squaring combined to push the dollar firmer yesterday. Emerging market currencies were mainly on the back foot, and we saw the rand weaken to R15.67 levels after having opened at R15.49. The rand ended the day at R15.63 and is currently trading weaker at R15.67 this morning, more or less in the middle of the local currency’s recent range. While US Treasury yields rise, the USD will enjoy some added support, and we will await US non-farm payrolls on Friday to see if the US economy is still on a growth trajectory.
Precious metal and base metal prices ended lower yesterday on the back of the stronger dollar. Gold has lost a bit of its appeal as a safe haven and weakened further this morning and is currently quoted at $1,831, while Platinum and Palladium are slightly stronger at $966 and $2,005, respectively. The price of copper is under pressure in the Asian session.
The move this morning is more a case of dollar strength than a rethink of the trajectory for copper. Brent crude traded higher at $122.80 during most of yesterday with the price being underpinned by the EU ban on Russian imports and the lifting of Covid restrictions in Shanghai, but plunged overnight, with the front-month Brent contract retreating by almost 6% to currently trade back near $115 per barrel. There is pressure from OPEC+ to look to suspend Russia from the pact, and this could possibly lead to Saudi Arabia and the UAE pumping out more oil, thus easing some supply concerns.
The DXY index is back at 102.00, with the dollar trading firmer against the euro, pound, and yen this morning. The greenback is quoted at 1.0710 against the euro and at 1.2585 against the pound, while it is up at 129.20 against the yen.
The US Treasury yield curve steepened overnight as the 30y and 10y yields rose while the 2y-yield was flat. The stronger dollar saw Wall Street give back some of its recent gains as the S&P closed 0.63% lower, the Nasdaq lost 0.41%, and the Dow was 0.67% weaker. US futures have opened in the green this morning, the Nikkei is positive, but Chinese markets are weaker.