Dollar Edges Higher, Hits Two-Week High to Yen
The euro retreated from a monthly high on Wednesday as the US dollar pushed higher, boosted by higher Treasury yields, as global inflation fears resurfaced.
The dollar index, which measures the currency against six major counterparts, including the euro, jumped 0.2 per cent to 101.96, extending Tuesday’s gains as data showed eurozone consumer inflation reaching a new high.
Euro
The euro was down 0.2 per cent against the dollar; it continued its retreat from a one-month high of $1.0787 achieved on Monday, when eurozone national inflation readings projected a high print for the bloc. On Monday, the dollar index fell to a one-month low of 101.29, having fallen from a nearly two-decade high of over 105 in mid-May. US inflation and other economic indicators appeared to be peaking amid the Federal Reserve’s relentless policy tightening.
Markets have priced in half-point interest rate increases for the Fed’s meetings this month and next, consistent with policymakers’ signals. Still, the picture remains uncertain. The dollar rose 0.5 per cent to 129.345 yen, having previously reached 129.54, its highest level since May 17, on rising US Treasury yields.
Yield differentials between the United States and Japan deter any tentative attempts to pull the pair towards 125. Benchmark 10-year Treasury yields rose 1.8 basis points to 2.8622 per cent after reaching their highest level since May 19 at 2.888 per cent earlier.
The disparity between the 10-year US and Japanese bond yields has increased to 265 basis points; the most since May 19. Other currencies changed little versus the Canadian dollar ahead of the Bank of Canada’s rate-setting meeting at 1400 GMT; the prediction is a 50-basis-point increase.
Statistics revealed that Australian GDP increased by 0.8 per cent in the March quarter compared to the previous quarter; hence, the Australian dollar jumped 0.2 per cent to $0.7185; the currency exceeded market expectations of a 0.5 per cent increase. The New Zealand dollar declined 0.1 per cent to $0.65065.
