New dollar highs against euro, yen and Aussie.
Main impetus is the continued decline in European yields.
China takes new initiative to put more local government debt on the balance sheets.
The US dollar's bull advance, spurred by the divergence in the monetary policy, is continuing in earnest today after briefly consolidating yesterday. The greenback traded at new multi-year highs against the euro, yen and Australian dollar, but is stronger against all the major currencies and emerging market currencies. The lone exceptions are the Hong Kong dollar and the Chinese yuan, which are flat.
There has been no fresh impetus. Yes, comments from the outgoing Dallas Fed President Fisher talked about how waiting too long to raise rates may force more aggressive action later. There is nothing new in his hawkish stand. Cleveland Fed President Mester reiterated that should the economy continue to perform as she expects, a hike in Q2 would be appropriate. However, short-end of the curve, most sensitive to the timing of Fed action, was unmoved. If anything, it is continuing to consolidate rise in yields seen in response to the jobs data at the end of last week.
The Eurosystem's Public Sector Purchasing Program continues to get underway, and it seems to be helping drive the dollar higher. In the US experience, bond would rally in anticipation of central bank purchases and then sell-off as it began. There has been no "buy the rumor, sell the fact" activity in Europe. European bond yields continue to fall. New record low10-year yields are being recorded in Germany, Italy, Spain, Portugal and Netherlands. Record low 2-year yields are being seen in France, Italy, Spain and Portugal.
