US dollar perks up as risk trades consolidate

<p>The US dollar is up off the floor as US stocks give back some gains. Tomorrow is the final day of August so month-end flows have likely been a factor this week and Credit Agricole earlier in the week suggested there would be some USD buying.</p><p>At one point stocks had given back all their gains but they've since steadied with the S&amp;P 500 up 0.4%. </p><p>USD/JPY has been strong as yields chop near unchanged on the day.</p><p>I continue to think that the bond market is in charge here and that yields are headed lower. I hardly think it's controversial to anticipate weakness in the US economy as the debate largely centers around how substantial the weakness might be. US 10s are flat today at 4.12%.</p><p>"One might be tempted to suggest it will take a far more disappointing jobs update to break 10-year yields back into 3-handle territory, although the bias toward lower yields already demonstrated could take on a momentum all its own as even as +150k payrolls growth would be consistent with the delayed impact of prior hikes finally filtering through to the real economy," writes BMO today.</p><p>There is some talk about r-star and pricing in a lower terminal rate. A Reuters reporter asked me about it today but I don't think it's a compelling driver.</p>

This article was written by Adam Button at www.forexlive.com.