Dollar Rallies Across Board, Adds 0.5%

The United States of America Dollar, on Monday, April 23, bounced to a seven-week high after a rise in the 10-year U.S. Treasury yield to within a whisker of the psychologically important 3-percent level prompted buying of the greenback, leaving the euro and yen sharply lower.

Against a basket of currencies the dollar index rose 0.5 percent to 90.728, its highest level since March 1.

Rising U.S. bond yields have not always fed through to a higher dollar in 2018 as U.S. political uncertainty and geopolitical tensions have sometimes caused a breakdown between interest rates and currency performance.

But with the 10-year Treasury yield closing in on 3 percent and the gap between U.S. and German government bond rates at a 29-year high, the dollar was bought across the board.

Analysts and investors say that should Treasury yields push past 3 percent, that would signal the start of a bear market for bonds and produce levels which have triggered market spasms in the past.

“Finally rising U.S. yields are having at least some effect on the dollar. Investors could not ignore this indefinitely,” Commerzbank currencies strategist Ulrich Leuchtmann said.

“If you believe that the Fed (Federal Reserve) will do what it has done for the last 30 to 40 years, then you will have to come to the conclusion that this will be positive for the dollar,” he said, predicting that the U.S. central bank would tighten policy further to curb inflation.

The Australian dollar skidded to its weakest since Dec. 14, falling to as low as $0.7634 before recovering slightly to $0.7643, while sterling and the Canadian and New Zealand dollars also dropped.

The rise in yields was spurred by worries about further inflationary pressures, but also by increases in U.S. debt issuance, signs of a thawing of relations between the United States and China, and North Korea promising to suspend nuclear missile tests and instead pursue peace.

North Korea said on Saturday it would immediately suspend nuclear and missile tests, scrap its nuclear test site and pursue economic growth and peace instead. It made these comments ahead of planned summits with South Korea and the United States,Reuters reports.

U.S. Treasury Secretary Steven Mnuchin said he may travel to China, a move that could ease tensions between the world’s two largest economies.

 

 

 

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