With the exception of the yen, the US dollar is lower against all the major currencies. US Treasury yields are firm, extending yesterday’s rise a little. This may help keep the dollar straddling JPY109, but unwinding long yen cross positions is helping underpin the other major currencies. The Dollar Index is making a new low for the week and appears poised to test support around 98.85-99..00. 

The Indonesian rupiah is one of the few emerging market currencies under water today, following what appears to be an electoral defeat for an ally of President Widodo in the Jakarta gubernatorial race. Separately, the central bank kept rates unchanged at 4.75%. It is the fourth consecutive losing session for the rupiah.  

The news stream is actually light, suggesting the pressure on the dollar may be emanating from sentiment and positioning. There were three economic reports of note. The most important of which was the Japanese trade figures.  

Japan’s trade March trade surplus of JPY614.7 bln was larger than the Dow Jones survey of economists projected (JPU576 bln), but still off more than 17% from a year ago. Merchandise exports rose 12% year-over-year, nearly twice the median guesstimate. Exports to Asia were strong (16.3% year-over-year), reaching a record high, helped by Chinese demand for autos and auto parts.Imports rose 15.8%, well above February’s 1.2% gain and half again as much the as 10% anticipated. The value of Japanese exports rose to the highest level since September 2009.  

Japan’s trade figures are under closer political scrutiny given the stance of the Trump Administration. Exports to the US rose 3.5%, the second consecutive increase, though auto exports were off 7.2% (in volume terms).Imports from the US rose 16.3% (in value terms). The US bilateral deficit with Japan narrowed 8.1% from a year ago.  

Separately, we note that the MOF weekly figures show Japanese investors continue to repatriate funds. Between foreign stock and bond sales, Japanese investors sold a JPY1 trillion of foreign assets last week. For their part, foreign investors bought about JPY726 bln yen of Japanese paper assets, about a 25% decline from the previous week. Evidence that yen strength reflects safe haven demand still seem elusive.