The US dollar remained weak with the US Dollar Index hitting a low of 79.060 on May 6. The dollar was overshadowed by the escalating unrest in Ukraine although an olive branch was extended by Russia in mid-week to end the violence. Investors’ incentive to hold the dollar was also dampened by the fall in the long-end US Treasuries (UST) yield with the 10-year bond yield dipping below 2.6%.
The US economy is showing nascent signs of shaking off the earlier weather related weakness. Data released showed that April ISM non-manufacturing index rose to 55.2 from 53.1 in March while trade deficit in March narrowed to US$40.4bil. This recovery view was further reinforced by the Federal Reserve chairman Janet Yellen’s testimony to the US Congress on Wednesday. Key risk to this view is the slowing momentum in the US housing activity.
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