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29 May 2013
Flash: US dollar supported by rising US yields - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the US dollar has strengthened further in the Asian trading session with the dollar index around 3.5% higher during the month of May.
He sees that the US dollar has been the best performing G10 currency in 2013, supported by rising real yields in the US. Further the release of the stronger than expected US consumer confidence and house price reports yesterday resulted in US yields moving to their highest levels this year. The 10-year UST yield increased to 2.21% reaching its highest level since April 2012 having increased by around 60 basis points since early May. He adds that the sell off in US fixed income is being triggered both by heightened expectations that the Fed will begin tapering QE in the second half of 2013, and the strengthening cyclical momentum of private demand in the US. He writes, “The US economy appears to be still holding up well despite a fiscal drag of 1.8 percentage points of GDP in 2013.”
Additionally, he sees that the improving health of households’ balance sheets is helping to provide an offset to the significant fiscal drag. As was evident by the rise in US consumer confidence in May to its highest level since February 2008 which was supported by the rising equity market, lower gas prices, and higher house prices. He comments that the S&P/ Case-Shiller measure of US house prices increased by a further 1.12% in March lifting the annual rate of growth to 10.87%, the fastest annual pace of growth since April 2006, while house prices still remain around 28.0% below their peak levels from July 2006.
He sees that the US dollar has been the best performing G10 currency in 2013, supported by rising real yields in the US. Further the release of the stronger than expected US consumer confidence and house price reports yesterday resulted in US yields moving to their highest levels this year. The 10-year UST yield increased to 2.21% reaching its highest level since April 2012 having increased by around 60 basis points since early May. He adds that the sell off in US fixed income is being triggered both by heightened expectations that the Fed will begin tapering QE in the second half of 2013, and the strengthening cyclical momentum of private demand in the US. He writes, “The US economy appears to be still holding up well despite a fiscal drag of 1.8 percentage points of GDP in 2013.”
Additionally, he sees that the improving health of households’ balance sheets is helping to provide an offset to the significant fiscal drag. As was evident by the rise in US consumer confidence in May to its highest level since February 2008 which was supported by the rising equity market, lower gas prices, and higher house prices. He comments that the S&P/ Case-Shiller measure of US house prices increased by a further 1.12% in March lifting the annual rate of growth to 10.87%, the fastest annual pace of growth since April 2006, while house prices still remain around 28.0% below their peak levels from July 2006.