Central banks may continue to buy EUR/USD on dips but traders are shifting their focus to selling the pair on rallies. Interest rate differentials are back in vogue and the huge back-up in US yields is just too significant to ignore.1.3900 offers are growing, dealers report.
The yield spread should draw some of the Japanese investment that has been flooding off shore from Japan in recent sessions. The jump in USD/JPY to 97.00 from 95.00 yesterday suggests that move is already well underway.
Despite fears higher rates will choke off the US recovery, commodity currencies are attracting buying interest on dips. The Bank of Korea was a rumored buyer of AUD and CAD on pullbacks earlier today.
