Dollar gains after 2-day drop, stock futures dip: Markets wrap

The dollar snapped two days of declines on Tuesday on stronger US economic data, helping ease an outsized jump in Asian currencies.

A gauge of the greenback rose 0.2% after data showed activity at US service providers accelerated in April.

Taiwanese dollar gained 0.3% Tuesday following its biggest surge since the 1980s on Monday. The yen was little changed while the Malaysian ringgit weakened 0.8%.

China’s central bank kept its daily fix for the yuan steady as the market reopened after a holiday. 

The Philippine peso stood at ₱55.544 vs $1 on Tuesday, up from ₱55.748 on Monday and ₱55.933 on Friday, as per BSP data.

US equity-index futures dropped 0.3% after the S&P 500 halted its longest rally in about 20 years. There’s no cash trading in Treasuries during the Asian day as Japan is closed for a holiday.

President Donald Trump’s aggressive trade talk has rattled markets since he took office in January, undermining the dollar’s traditional haven role in times of stress and leading investors to allocate away from US assets.

Central bankers from Taiwan to Hong Kong are responding to the sharp appreciation in local currencies by intervening in the market.

“A bit of calmness before another leg in the trade storm,” said Rodrigo Catril, strategist at National Australia Bank Ltd. in Sydney.

“Forex markets, especially Asia forex markets, are taking a breather as we wait for new US trade information.” 

Activity at US service providers accelerated in April after a slumping in the prior month. This suggests the services sector is holding up even as manufacturing contracts on the heels of higher US duties.

Tariffs are the cornerstone of the Trump administration’s policy to address trade imbalances, increase domestic production and bolster national security.

Meanwhile, the deep inversion of a popular Taiwan-dollar derivative suggests selling pressure on the US currency has plenty of room to run. The spread between the Taiwan dollar spot rate and one-year non-deliverable forwards on the Taiwan dollar-US dollar currency pair swelled to around 3,000 pips on Monday, the widest level in at least two decades.

The divergence is the latest sign of seemingly insatiable demand for Taiwan’s currency on speculation the island will reach a trade deal with the US.

Meanwhile, Hong Kong authorities spent a record amount in an attempt to defend the foreign-exchange peg. The authorities said they continued to purchase US dollars.

“I would be cautious about leaning in too much into this appreciation as central banks in Taiwan, Malaysia and especially Hong Kong have significant means to buy dollars if they need to,” said Leah Traub, a portfolio manager and head of the currency team at Lord Abbett & Co. 

In late US hours, Ford Motor Co. pulled its financial guidance and said auto tariffs will take a toll on profit.

Palantir Technologies Inc. dropped more than 9% in late trading Monday after its results failed to live up to investors’ loftiest expectations for a company whose stock has led the S&P 500 in gains this year.

Attention will soon shift to Wednesday’s Federal Reserve decision after bond traders dialed back rate-cut bets that had steadily mounted as Trump’s trade war unleashed havoc in financial markets. 

“Uncertainty rules amid a trade war and the ever-changing landscape of tariffs, but with the hard data on consumer spending and employment still hanging in there, the Fed will remain firmly planted on the sidelines,” said Greg McBride at Bankrate. 

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 11:56 a.m. Tokyo time

• Australia’s S&P/ASX 200 was little changed

• Hong Kong’s Hang Seng rose 0.5%

• The Shanghai Composite rose 0.7%

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro was little changed at $1.1307

• The Japanese yen was little changed at 143.81 per dollar

• The offshore yuan fell 0.4% to 7.2288 per dollar

Cryptocurrencies

• Bitcoin was little changed at $94,266.59

• Ether fell 0.4% to $1,802.39

Bonds

• Australia’s 10-year yield advanced five basis points to 4.32%

Commodities

• West Texas Intermediate crude rose 1.5% to $57.98 a barrel

• Spot gold rose 0.8% to $3,360.92 an ounce