The United States of America dollar, on Tuesday, May 15, soared higher against a basket of currencies, having bolted out of its lowest level in more than a week as hopes for easing global trade tensions pushed U.S. bond yields higher.
The dollar’s index versus a basket of six major peers rose 0.1 percent to 92.638, inching away from a trough of 92.243 set on Monday, which was the lowest for the dollar index since May 2.
The benchmark 10-year U.S. Treasury yield was steady in Asian trading on Tuesday at 2.999 percent, after rising 2 basis points on Monday.
The U.S. 10-year bond yield had edged higher on Monday, as trade tensions eased in the wake of U.S. President Donald Trump’s pledge to help Chinese telecommunications company ZTE Corp, which has been penalised for violating U.S. sanctions with Iran.
The dollar index had scaled a four-month high of 93.416 last week, as a rise in U.S. Treasury yields highlighted the wide interest rate gap between the United States and some other developed economies, and bolstered the dollar’s appeal.
Although the dollar’s rally has lost steam after soft April U.S. consumer price data released last week raised doubts as to whether the U.S. Federal Reserve would raise interest rates as many as four times in 2018, some traders remain upbeat about its near-term outlook.
Despite the dollar’s recent rally, some analysts remain sceptical about the chances of a sustained push higher in the greenback.
Growing worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 due to a government spending splurge and large corporate tax cuts, have dimmed the outlook for the greenback, along with concerns about the country’s current account deficit.
Against the yen, the dollar rose 0.1 percent to 109.74 yen . The greenback faces resistance on technical charts at levels around 110.00 yen, having set a three-month high of 110.05 yen in early May, Reuters reports.
Investors are focused this week on speeches by Fed officials, as well as economic indicators such as U.S. retail sales data due later on Tuesday.