US Treasury yields continue to retreat, dragging USD to two-week low; GBPCAD slightly rises but CAD remains broadly appealing as market sentiment improves

• USD dropped to two-week low as yields retreat
• GBPCAD slightly rises today but demand on CAD stays strong
• India’s central bank keeps rates at record low as COVID cases surge

USD softened to two-week low on Wednesday’s trading session in Asia after bond yields decline. The five-year Treasury yields dropped sharply to 0.874% after hitting a record high at 0.988% on Monday. Investors are probably reducing their bet on Fed’s more aggressive policy attempts, gradually confirming that the Fed will not send out tightening signal earlier than pledged. This quarter we have seen the dollar index rising 3.6%, marking the biggest quarterly rise in three years. Especially against JPY, USD rose 7.2%, largest since 2016Q4. Chief currency strategist at Citigroup Osamu Takashima believes that, USDJPY is nearing a critical testing point on its long-term uptrend. He notes the key support level from its 21-day moving average at 109.40 which he believes could potentially be a bearish turn if broken. However, market is full of uncertainties and investors should also pay attention to surprises on the fundamental economic data to track currency movements.

GBPCAD is trading slightly higher today, currently around 1.7381 at press time, up about 0.11% since opening. On the one hand, Britain’s gradual economic reopening continues without surprises as more shops and bars are expected to reopen by next week. The UK government also launched its Recovery Loan Scheme today to aid businesses. On the other hand, however, CAD also remains broadly and increasingly appealing. CAD is a currency correlated to risks and trade sentiment and has recently benefited from improving market conditions. Some investors speculate that the Bank of Canada could soon soften its bond purchasing plan and this speculation has helped boost CAD’s strength as well. On Wednesday, we will see Britain’s final March services and composite PMI results; on Friday, we will see Canada’s job market report.

India’s central bank has decided to keep its interest rate unchanged at record low, as COVID cases continue to surge with a record of more than 100,000 cases per day. Benchmark repurchase rate has been held at 4%, in line with expectations. As Asia’s economic begins to recover, inflation risks also grow higher. But India’s economy has not yet seen much recovery from the pandemic, leading the central bank to signal that it has prepared to support as long as necessary.