The Dollar Index (DXY), measuring the Greenback against a basket of six major currencies, initiated 2024 on an impressive note, marking a 0.81% surge from its 2023 closing value.
Expectations of a global easing of interest rates were scaled back, leading to a surge in bond yields. The 10-year US bond rate escalated to 3.94% (from 3.88%), with two-year US yields surging by 8 basis points to 4.33%.
While global rates experienced an increase, the upward movement was more moderate compared to the US. Germany’s 10-year Bund yield rose by 4 basis points to 2.06%, and the UK 10-year Gilt rate settled at 3.63%, up from 3.53%.
Among the major currency pairs, the Kiwi (NZD/USD) faced the most substantial decline, plummeting by 1% to 0.6250 from 0.6320 in light trading conditions. The Euro (EUR/USD) experienced a slump of 0.8%, settling at 1.0947 (compared to 1.1035), while the Australian Dollar (AUD/USD) fell by 0.7% to 0.6762.
In thin trading against the Japanese Yen, the Greenback surged to 142.00 (from 141.05). Japanese markets, observing a four-day holiday, remained unaffected by a recent earthquake with a magnitude of 7.6, which, as of now, had little to no impact on the Yen.
Sterling (GBP/USD) faced a decline to 1.2625 from 1.2735, primarily attributed to the broad-based strength of the US Dollar. This came as the UK Manufacturing PMI dropped to 46.2 in December, down from the previous 47.2.
The US Dollar demonstrated strength against Asian and Emerging Market Currencies, with USD/CNH (Dollar-Offshore Chinese Yuan) rallying by 0.53% to 7.1550 from 7.1250, and USD/SGD climbing to 1.3267 (from 1.3197).
On Wall Street, stocks experienced a decline in response to higher US treasury rates, with the DOW dropping to 37,625 from 37,705 and the US S&P 500 losing 0.96% to 4,730 (from 4,770). Australia’s ASX 200 also lost 0.3%, closing at 7,580.
Recent economic data revealed China’s Caixin Manufacturing PMI edging up to 50.8 from 50.7, surpassing median forecasts at 50.4. However, the US December Final Manufacturing PMI fell to 47.9 from 48.2.
In the currency markets, EUR/USD faced downward pressure, falling to 1.0947 from 1.1035 in the wake of the stronger Greenback. Similarly, AUD/USD declined to 0.6763 from 0.6830, with Australia’s Jibun Bank Manufacturing PMI easing to 47.6 from 47.7. GBP/USD experienced a downward trend, concluding at 1.2625, down 0.8% from 1.2735, amid volatile trade.
The USD/JPY pair, in thin and choppy trade, rallied to 142.00 from 141.05, while the country continued to assess the effects of a powerful earthquake that struck on New Year’s Day.
