The U.S. dollar was mostly lower, surrendering some of its pre-weekend gains, against most of the major currencies. Sterling was the notable exception. It is heavy in the wake of a drop in Rightmove's house price index for the third consecutive month, and some mortgage and money supply data that revealed M4 contracted by 0.2%).
Japan's markets were closed Monday. The dollar continues to be confined to narrow trading ranges. Japanese exporters and margin traders are thought to be capping the greenback near JPY86, while fear of intervention is provided support near JPY85.50. The Australian dollar starts the week off with a bang, as hawkish comments by the Reserve Bank of Australia governor keep the door open to additional rate hikes.
This week will usher a big test for sovereign European debt as Ireland is slated to sell up to €1.5 billion worth of debt, maturing in 2014 and 2018. Overnight, with concerns about Ireland's sovereign debt issues, and to a lesser degree Portugal, the 10-year generic yields on the periphery increased marginally by 0.05%. Consequently, German yields have flattened with the two-year falling to 0.783.
Treasury markets barely budged with yields on the short-end up and yields on the back-end down. Overall, Treasury markets are on hold until we get a further clarification from the Federal Reserve about its view on the economy and language about unconventional policy.
