The Moderna (NASDAQ:MRNA) vaccine announcement had a negligible effect on currency markets overnight. Asian and G-10 currencies were almost unchanged for the session, with only the pro-cyclical Canadian, Australian and New Zealand dollars outperforming. The US yield curve steepened after the Moderna announcement, and that is likely to have offset any US dollar rotation momentum in the short-term. The net result being a nil-all draw as far as currency markets are concerned.
Asian currencies have edged higher in Asia this morning after the PBOC set the USD/CNY fixing at 6.5762, the strongest yuan fix since June 27th, 2018. With the PBOC showing no signs of discomfort over the yuan appreciation, regional currency appreciation is set to continue, although local central banks in countries such as South Korea and Thailand, will probably tactically “smooth” gains.
The USD/JPY rally petered out ahead of its 100-day moving average at 105.75, with the 5-month trendline resistance at 105.65 capping gains. USD/JPY has fallen 115 points to 104.50 since then and now looks poised to retest its November lows near 103.20. Only a further steepening of the US yield curve appears likely to delay, and it is notable that higher US yields overnight still saw USD/JPY edge lower.
The almost unchanged ranges seen overnight is likely to be a mere delay to further dollar weakness. Amongst the majors, the EUR, GBP, CHF, JPY and Commonwealths all look poised for more technical gains.
Getting back to the Covid situation, restrictions continue ramping up in Europe, with Sweden the latest to unveil tough restrictions on public gatherings. The situation in the United States is particularly worrisome, with new state-wide restrictions seemingly every day. The election stand-off is complicating the picture, and it seems inevitable that US economic data will suffer into Q4. The goings-on in America matters greatly, of course, as it represents 25% of global GDP.