Forex Flash: Dollar up on G10, down on EM – Wells Fargo

Nick Bennenbroek, Head of Currency Strategy at Wells Fargo notes that the U.S. dollar is stronger against most G10 currencies and weaker against most emerging currencies, while broader financial markets are showing some recovery from yesterday’s weakness.

He sees that European equities and U.S. equity futures are higher, and Spanish and Italian bond markets are also stronger in today’s trading. Further, among the G10 currencies, international developments are driving today’s FX moves. The Yen fell further as the Bank of Japan governor said he would step down earlier than expected, potentially paving the way for more aggressive policy action from Japan’s central bank. The Australian dollar is lower on dovish comments from that country’s central bank.

Bennenbroek notes that the major European currencies are steady to lower, despite European data that was constructive on balance. Also, Emerging currencies are generally stronger, driven more by the gains in European and U.S. He sees that Emerging European and Latin American currencies are leading the way higher, and Asian currencies are also stronger. He finishes by writing “Although FX markets have started the week on a slightly uncertain note, the broader financial market backdrop remains relatively calm and generally favourable. For the near-term, we continue to lean towards gains in most foreign currencies and further weakness in the Japanese yen.”