The dollar index (DXY00) on Wednesday rose slightly on quarter-end demand for the dollar.  Also, dovish ECB comments on Wednesday undercut the euro and boosted the dollar.  Meanwhile, the yen recovered from a 33-year low and moved higher on speculation that Japanese authorities may soon intervene in currency markets to support the yen. 

US weekly MBA mortgage applications fell -0.7% in the week ended March 22.  The refinancing mortgage sub-index fell -1.6%, and the purchase mortgage sub-index fell -0.2%.  The average 30-year fixed rate mortgage fell -4 bp to 6.93% from 6.97%.

The markets are discounting the chances for a -25 bp rate cut at 15% for the next FOMC meeting on April 30-May 1 and 78% for the following meeting on June 11-12.

EUR/USD (^EURUSD) on Wednesday fell by -0.08%.  The euro on Wednesday posted modest losses due to dovish comments from ECB Governing Council member Kazaks and ECB Executive Board member Cipollone, who expressed support for an ECB rate cut at the June meeting.  Losses in the euro were contained after Wednesday’s Eurozone economic confidence report was stronger than expected.

ECB Governing Council member Kazaks said, "Inflation is low and will continue to fall in the whole Eurozone," and June may be a good time for the ECB to begin lowering borrowing costs.

ECB Executive Board member Cipollone said, "If incoming data confirm the scenario foreseen in the March projections, the ECB should stand ready to swiftly dial back its restrictive monetary policy stance."

The Eurozone Mar economic confidence index rose +0.8 to 96.3, stronger than expectations of 96.2.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 13% for its next meeting on April 11 and have fully priced that rate cut (101%) for the following meeting on June 6.

USD/JPY (^USDJPY) on Wednesday fell by -0.13%.  The yen on Wednesday rebounded from a 33-year low against the dollar and moved higher on speculation that Japanese authorities may be preparing to intervene in currency markets to support the yen after Japan's Ministry of Finance, Bank of Japan, and Financial Services Agency held an unscheduled meeting. 

Comments from Finance Minister Suzuki and Japan's top currency official Kanda sparked short covering in the yen when they said they were watching forex market moves “with a high sense of urgency.”    Finance Minister Suzuki said, "4% forex moves in 2 weeks are not moderate, and we are watching market moves with a high sense of urgency."  Japan's top currency official Kanda said, "The recent weakening of the yen cannot be said to be in line with fundamentals, and it is clear that speculative moves are behind the yen's fall.  We will take appropriate action against excessive moves without ruling out any options."

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 1% for the April 26 meeting and 18% for the following meeting on June 14.

April gold (GCJ4) on Wednesday closed up +13.4 (+0.62%), and May silver (SIK24) closed up +0.129 (+0.52%).  Precious metals on Wednesday closed moderately higher.  Gold had support Wednesday on dovish comments from ECB Governing Council member Kazaks and ECB Executive Board member Cipollone.  Also, Wednesday’s decline in global bond yields supported precious metals.  In addition, geopolitical tensions in the Middle East are boosting safe-haven demand for precious metals after talks for a cease-fire between Israel and Hamas stalled.

On the negative side, a stronger dollar Wednesday was bearish for metals.  Also, strength in stocks Wednesday reduced safe-haven demand for precious metals.  Gains in silver were limited due to negative carryover from Wednesday’s slide in copper prices to a 2-week low. 

• Dollar Modestly Higher on Weakness in the Euro
• Dollar Recovers Early Losses on Quarter-End Dollar Demand
• Dollar Under Pressure from Strength in Stocks
• Dollar Falls Back on Weak US Economic Reports