Dollar Slumps Back to 10-Month Low on Health-Care Bill Setback

  • Strong bias across platforms to sell dollar, traders say
  • RBA says growth shows signs of pickup to send Aussie surging

Nomura's Rochester Sees More Downside for U.S. Dollar

The dollar slumped back to a 10-month low and Treasury yields fell after two more Republican senators declared their opposition to the latest effort to overhaul the health-care system, effectively killing the legislation in its current form. The Aussie surged as much as 1 percent after minutes from the central bank suggested growth is picking up.

The greenback was sold against all Group-of-10 peers across platforms, with leveraged selling by North American accounts, according to traders who asked not to named as they aren’t authorized to speak publicly. Senators Mike Lee and Jerry Moran said they won’t support the proposed measures because it doesn’t go far enough to address rising costs.

“Any hopes of dollar support from a successful vote on the Senate’s health-care bill look to be vanishing after today’s news,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Near term, the dollar path of least resistance is down. We still think the data -- inflation in particular -- will provide the Fed with enough ammunition to hike in December and boost the dollar, but this is a fourth-quarter story.”

The Australian dollar and bond yields jumped after an “upbeat interpretation” of the minutes, according to Sue Trinh, head of Asia FX strategy at RBC Capital Markets. The central bank said economic growth probably increased in the second quarter, and also pointed to strength in the job markets. The Aussie surged to its strongest against the dollar since May 2015.

  • BBDXY falls as much as 0.4% to the lowest since Sept. 8, 2016
    • “While this is being perceived as yet another sign that the Republicans -- and Trump administration -- are unable to get anything done on the fiscal side, I don’t think expectations for the health-care bill being passed were actually that high,” says Peter Dragicevich, a foreign-exchange strategist at Nomura Holdings in Singapore. “This suggests that the near-term USD move could Peter out”
    • Treasury 10-year yield falls 2bps to 2.30%
  • EUR/USD climbs 0.5% to 1.1531; touched 1.1538, highest since May 3
    • Gains trigger momentum buying on break of 1.1500; leveraged selling for North American accounts taking profit above 1.1500 taken out, traders say
  • USD/JPY declines 0.4% to 112.22 as macro and leveraged accounts add to shorts
  • NZD/USD gains 0.2% to 0.7333 after earlier sliding as much as 0.7 percent to 0.7264 on inflation miss
    • Investors had exited kiwi long positions well away from their intended levels after consumer prices grew 1.7 percent in the second quarter from a year earlier, undershooting all except one of economists’ estimates and the 2.1% projection by the Reserve Bank 
  • AUD/USD gains 0.9% to 0.7868 after erasing declines
    • Leveraged accounts holding short AUD/USD were forced to square positions up through 0.7810 after the release of RBA’s July meeting minutes, according to an Asia-based FX trader
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