USD remains under pressure – BBH

Analysts at BBH note that after a choppy North American session yesterday, the dollar and US yields remain under pressure.  

Key Quotes

“The dollar is lower against all the major currencies and most emerging market currencies, including the recently shellacked Turkish lira and Mexican peso.”

“The main consideration appears to be the further unwinding of positions as no more details of the new administration's policies were provided.  The one economic element, a reiteration that going forward pharmaceutical companies will have to bid for the US government contracts appeared to weigh on the share prices of some companies in that space.  For example, the Nikkei's 1.2% decline was paced by a 3.3% decline in pharmaceuticals/biotech.  In Europe, the Dow Jones 600 is off about 0.5% in late morning turnover, with health care the weakest sector.  Within that, pharmaceuticals/biotech is off 2.1%.”

“The Dollar Index fell it its lowest level since December 14, the day the Fed hiked rates.  The low on that day was 100.73.  Today's low, thus far, is 100.81.  The US 10-year bond yield reached almost 2.3% today.  That is the lowest yield since November 30.  The two-year yield has slipped to 1.14%, its lowest level in about a month.”

“However, the intraday technicals suggest the North American session is likely to see the dollar recover.   Most of the dollar's drop was recorded in Asia, and European participants showed little appetite to extend the move.  Yesterday, amid trendless and particularly choppy activity, the euro fell to almost $1.0450 but quickly popped back to record new session highs just below $.10625.  Follow through buying in Asia lifted it to $1.0665.  It has drifted lower in Europe and the intraday technical indicators are rolling over.  A break below $1.0580-$1.0600 now would lend credence to the idea that a near-term high may be in place.”