Published: Wed, May 16, 2018
Markets | By Otis Pena

USA dollar climbs on rising Treasury yield

USA dollar climbs on rising Treasury yield

The dollar index versus a basket of six major peers added 0.1 per cent to 93.335 after rallying to 93.457 overnight, its highest since December 22.

The currency's renewed strength came as the issue in the Korean Peninsula softens and the risk of a full-scale trade war between the USA and China lessens, allowing investors to consult the 10-year yield for signs.

The U.S. dollar traded higher against other major currencies in late trading on Tuesday as rising rates on U.S. Treasury bonds underpinned appetite for the currency. The U.S. dollar rose to 1.0019 Swiss franc from 1.0000 Swiss franc, and it increased to 1.2863 Canadian dollars from 1.2796 Canadian dollars.

The dollar has climbed higher since mid-April and recovered most of its 2018 losses, following a reevaluation of the course of the USA monetary policy against other countries.

The dollar edged down 0.05 per cent to 110.285 yen, having risen to 110.450 overnight, its strongest since February 5.

"The implication is that means inflation has more upside potential, which means the Fed is more likely than not to hike four times this year, versus what the market was pricing in a month ago, which is two to three times", Mackay said.

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The benchmark 10-year US Treasury yield was steady in Asian trading on Tuesday at 2.999 per cent, after rising two basis points on Monday.

"After the U.S. CPI (consumer price inflation) data the dollar's momentum has fallen off", said Alvin Tan, an FX strategist at Societe Generale. "But against the yen, its advance could stall if the negative impact of higher yields on equities is prolonged", said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

Japan's gross domestic product (GDP) data did not much have an effect on the safe-haven currency.

The pound shed 0.2 percent to 1.3469, after recording its weakest level since December 29 of 1.3452 on Tuesday.

The euro fell as much as half a percent to $1.1783, its lowest since late December, after reports surfaced that Italy's anti-establishment 5-Star Movement and far-right League plan to ask the European Central Bank to forgive 250 billion euros of debt. U.S. crude fell 0.07% to $70.91 a barrel and Brent was last at $78.94, up 0.91% on the day. The Australian dollar was down to 0.7473 dollar from 0.7529 dollar.

The currency shrugged off reports about Italy's anti-establishment 5-star Movement and far-right League's plan to seek pardon from the European Central Bank (ECB) about a €250 billion ($296 billion) Italian debt.

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