Forex – Dollar’s March Higher Stifled by Rally in Yen on Safe-Haven Demand

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Investing.com – The U.S dollar edged higher against its rivals Friday following a rebound in U.S. home sales, but gains were limited by a sharp rise in the yen as U.S. government bond yields slumped amid fears of slowing growth.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.17% to 96.15.

The National Association of Realtors report showed existing home sales rose 11.8% in February from a 1.4% decline in the prior month to a seasonally adjusted annual rate of 5.51 million units. Economists were expecting a 2.2% increase to 5.10 million homes.

The rebound in home sales was partly supported by the slump in mortgage rates thanks to the Fed’s ongoing pause on monetary policy tightening, analysts said.

“After three-consecutive monthly declines, this rebound in home sales certainly provides some relief on the outlook,” BMO said.

The drop in borrowing costs has helped (down over 50 bps from the highs late last year) and are “unlikely to be heading much higher anytime soon, as the Fed has seemingly promised this week,” the bank added.

The weekly Freddie Mac survey on mortgage rates, released Thursday, showed a 4.28% rate on a 30-year fixed-rate loan, down from 4.31% a week ago and 4.94% in mid-November.

But others argue lower borrowing costs are not enough to turn the tide for the embattled U.S. housing market.

“Concerns over the health of the economy will act to offset the positive impact of lower interest rates, and coupled with tight inventory levels that suggests existing sales will see minimal growth over 2019,” Capital Economics said.

The dollar’s march higher was held back by a fall in U.S. government bond yields as fears of economic slowdown intensified, propping up demand for the safe-haven yen.

USD/JPY fell 0.83% to 109.89.

Sterling, meanwhile, pared its losses from a day earlier against the greenback as the EU granted the U.K. a two-week extension.

GBP/USD rose 0.66% to $1.3194.

The extension was granted to allow the U.K. to consider whether it would opt for a longer delay and take part in European elections in May.

EUR/USD fell 0.78% to $1.1285 as German manufacturing PMI fell short of expectations, adding to concerns the euro zone economy remains stuck in a rut.

USD/CAD rose 0.42% to C$1.3415 as fears of slowing economic growth sent oil prices sharply lower, pressuring the loonie.

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