Dollar’s rising trend remains intact amid weak China 

The dollar keeps moving up amid signs of a lackluster outlook for major economies such as China and Japan.

The dollar maintained its rising trend on Monday in Asia amid signs of a lackluster outlook for major economies such as China and Japan.

Data released earlier in the day showed that China’s exports slid 15% from a year earlier in March while imports dropped 12.7%, pointing to sluggish demand at home and abroad. The drop in exports was far below the median forecast of a 10.0% increase expected. The fall in imports was largely as anticipated.

The Chinese data weighed the Australian dollar, pushing the commodity-linked currency  to US$0.7589 from around US$0.7680 late Friday in New York.

Meanwhile in Japan, data showed that core machinery orders fell 0.4% in February from the previous month, in a sign of continuing caution among Japanese companies over ramping up capital spending.

The weak Asian data came after Federal Reserve Bank officials made cases last week for the central bank to begin raising short-term interest rates as early as this summer. Their comments supported the dollar, which fell sharply after disappointing U.S. jobs data earlier this month.

At the same time, European government bonds yields have fallen on the back of European Central Bank’s asset-buying program, making dollar-denominated assets more attractive. Money managers tend to shift their assets to countries where they can generate higher yields.

“It looks like the non-farm payrolls data has been forgotten,” said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland. “What we are seeing is the combination of European stock buying and European bond buying. This is a typical QE trade.”

The euro  fell to $1.0592 from $1.0606 late Friday and was at   ¥127.62, compared with ¥127.58, according to EBS. The dollar  was at ¥120.46 from ¥120.30.

Akira Moroga, manager of the forex products group at Aozora Bank, said the diverging policy direction between the eurozone and the U.S. will likely push the euro down against the dollar.

Source: Marketwatch – Dollar’s rising trend remains intact amid weak China

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