Markets: New five-week low for the dollar; oil still under pressure

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Dollar index eyes 100.0 as it slips to fresh five week low
● Two-year US debt yields steady at 1.32 per cent amid Fed caution
US equity index futures dip as analysts’ earnings optimism wanes
European stocks soft, with London pressured as lower oil prices hit energy players
Gold back at two-week high as greenback falters afresh


The US dollar index (DXY) remains a focal point for markets, extending its losing streak to a fourth session, on track to record losing run since early November just before the US presidential election.

The DXY, a measure of the US currency against a basket of global peers, is off 0.2 per cent to 100.07 in Asia, after dropping 0.9 per cent last week for its largest weekly slide since mid-January.

The reversal comes as traders trim bullish buck bets following the Federal Reserve’s less hawkish than expected comments on the likely pace of interest rate rises.

Morgan Stanley writes that the currency is likely to stay under selling pressure.

Politics may also be weighing on the dollar — though debate may rage about whether such tensions ultimately help or hinder the buck because of its reserve currency status.

“The G-20 meeting…underlined the increasing divide between the US and other G20 nations, as was expected, along with the Merkel/Trump meeting that highlighted the extremely poor state of relations between the two countries,” said Marc Ostwald, analyst at ADM Investors Services International.

What to watch
Still, with the monetary policy continuing to be the main driver of forex, investors will be keen to hear what Fed members have to say in coming days, starting on Monday with a speech by the Chicago Fed’s Charles Evans.

Nine different Fed policymakers are due to speak this week, with chair Janet Yellen taking the podium on Thursday, according to Reuters.

Traders will also have an eye on the French presidential debate taking place later in the session.

Forex
Concerns have eased of late that Marine Le Pen, the anti-EU far right candidate, can win the ‎Élysée Palace, and this has provided additional support to the euro.

The common currency is taking advantage of broad dollar weakness to gain 0.3 per cent to $1.0769, close to its highest since early February.

Sterling and the yen are advancing too, up 0.3 per cent to $1.2425 and 0.2 per cent stronger at ¥112.50 per buck.

Oil
Oil prices remain under pressure as traders continue to fret that US shale production will easily compensate for Opec output cuts.

Brent crude, the international energy benchmark, is down 0.5 per cent to $51.49 a barrel, and West Texas Intermediate, the main US contract, is off 0.8 per cent to $48.40.

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