The US dollar continued to lose ground against most of its peers as sentiment on risk remained roughly positive ahead of tomorrow FOMC meeting. The dollar index gave up another 0.14% Tuesday morning as it reached 96.39. The single currency appreciated to 1.1355 (+0.15%) against the buck and is on its way to test yesterday’s high at 1.1359. Even safe haven currencies are grinding higher both the Japanese yen and Swiss franc blinking green on the screen. USD/JPY eased as low as 111.16, while the Swiss franc stabilised around parity against the USD.
Among EM currencies, the Russian rouble was the best performers over the last two days amid better than expected manufacturing data. Industrial output increase by a solid 4.1%y/y in February compared with a consensus of 1.5%. We could reasonably expect that the RUB would continue to appreciate in the medium to long term as the probability of US sanctions as slowly vanishing. In addition, the fact that the CBR has substantially increased its gold reserve, at the expense of US treasuries. Over the last 4 years, the CBR has increased its gold holding by 880 tons (+80%), while at the same time reducing its holding of long-term US treasuries by almost 90%. This could only positive for the rouble.