USD-SGD slips back below 1.2700 interim support

OCBC says USD-Asia will continue to track on the back of cues from the EUR-USD.

OCBC Treasury Research said:

While sentiment in the market still looks precarious for now, we have yet to see strong upward momentum in USD-Asia.

In fact, the USD-SGD has slipped back below the 1.2700 interim support and the USD-MYR also appeared somewhat softer compared to Monday’s trade. USD-IDR also starts Tuesday on a slightly softer tone, although we continue to see signs that buying interests will remain prevalent in the market.

For the best part, USD-Asia will continue to track on the back of cues from the EUR-USD.

BK Asset Management meanwhile noted (for 9 July 2012 trading):

After falling to a fresh 2-year low of 1.2235 at the start of the Asian trading session, the euro clawed back into positive territory to end the day slightly higher against the U.S. dollar. It has been a quiet day in terms of volatility in currencies but the rebound in the EUR/USD is at odds with the further sell-off in equities and the rise in Spanish and Italian bond yields.

It appears that even though European Finance Ministers met today to talk about Spain's bank bailout program and to hash out the details on some of the decisions made at the EU Summit, euro traders have completely taken their eyes off European bond yields. In our opinion, this is a dangerous mistake because rising borrowing costs is the source of Europe's problems.

Spanish 10 year bond yields are within 2bp of 7 percent while Italian bond yields are within 12bp of its record high of 6.18 percent. The recent interest rate cut by the ECB should have driven all European bond yields lower and while German yields responded accordingly, the move by the ECB did not bring much relief to the countries that need it the most.

RBS, on the other hand, reported (for 9 July 2012 trading):

The USD ceded some ground throughout the session amid some dovish commentary from Fed officials. Equities also closed slightly lower as earnings season started in the US.

Euro-area finance ministers met to discuss the latest measures to be used in the debt crisis but as of the time of writing there were few headlines to report.

EUR/USD remained below the pre-payrolls level from 6 July as did USD/JPY and AUD/USD. GBP/USD traded above 1.5520 towards the end of the US session.