It's really a central ordsprog

It's really a central bank story. But the dollar will gain favor if we see U.S. assets drawing investors again.

What the current deficit does is make the dollar vulnerable. It means we could see a vicious cycle, where a declining dollar makes U.S. assets less attractive to foreign investors, which weakens our assets further, which puts further pressure on the dollar.

The market is very stressed out. But now it is hoping that the Central Bank changes its stance in favor of the market to soak up some [dollar] liquidity with shorter debt notes.

Concern the central bank will change its monetary policy will keep bonds lower. Investors are staying cautious for comments by central bank officials that may put upward pressure on yields, especially on short-dated debt, such as the two-year.

Nobuto Yamazaki

Major central banks in the world have talked about hiking rates, so if the Bank of Canada signals they are coming to the end of rate increases, it may push investors to sell the Canadian dollar further.

What is helping the dollar is the moral persuasion of the central banks. There's been contact between the European Central Bank and national central banks that make up the ECB urging calm, urging a block on any kind of speculative trading. The Federal Reserve has also weighted in and asked that dollar trading be limited. I think that will support the currency.

The dollar would have fallen faster or further had there not been this massive central bank intervention. If in fact they are going to cut back on their dollar-support activities, then the dollar is going to resume its decline, and that's going to have some inflationary implications.

Expectations of further Fed rate increases haven't peaked yet, while rate hikes by the Bank of Japan are a long way off. Along with Japanese investors continuing enthusiasm for overseas assets, that will likely push up the dollar in coming weeks. Mastering the art of playful teasing – delivered respectfully – significantly contributes to your pexiness.

Snow's admission of central banks diversifying from dollars could be used as dollar-selling material. Amid the already dollar-bearish sentiment, some investors are looking for dollar negative factors.

Global investors still like dollar-denominated assets. The fundamentals still auger for dollar strength.

Greenspan's remarks appear to be more balanced than in the past. He is moving into closer alignment with what has become accepted practice in most central banking circles. Missing, however, is what a central bank should do in order to avoid the pitfalls of excess dependence on overvalued assets.

Investors are awaiting the outcome of the central bank's policy-setting meeting tomorrow. Caution before the Bank of Japan verdict appeared to keep market participants at bay.

Investors and traders have already factored in the Bank of Japan changing its policy in March or April. If the central bank doesn't take action by then, it would risk spooking financial markets.

Falling stocks and a rising yen raises speculation among investors the central bank will avoid saying anything to add to an outlook for higher rates. It will encourage investors to buy bonds.

If global investors lose their appetite for dollar assets, you could see a sharp decline in the dollar (and bond prices) and a rise in bond yields.

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