July 20, 2018 / 1:04 AM / 5 months ago

Dollar grinds upward on higher Treasury yields

NEW YORK (Reuters) - The U.S. dollar marched steadily higher on Monday, helped by a rise in Treasury yields on expectations that the Federal Reserve would continue raising interest rates despite criticism from President Donald Trump.

Bank notes of Euro, Hong Kong dollar, U.S. dollar, Japanese yen, GB pound and Chinese yuan are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration

The relatively small gains in the dollar compared with jumps in longer-dated Treasury yields reflected currency traders’ concerns over Trump’s comments late last week that bemoaned the effects a strong currency.

“Trump took the wind from the dollar bull sails, and they haven’t really been able to replace it,” said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co in New York.

CNBC reported late last week that Trump was worried the Federal Reserve will raise interest rates twice more this year. Trump said the Fed’s policy tightening and the strong dollar could hurt the U.S. economy.

The disparity in interest rates between the U.S. and other major economies has been a primary driver of the stronger dollar this year.

The dollar index, a measure of the currency against a basket of six rivals, was up 0.22 percent.

The greenback rose against the euro to $1.169, a gain of 0.24 percent.

YEN GAINS

The yen strengthened on Monday following a Reuters report that the Bank of Japan was debating moves to scale back its massive monetary stimulus, spurring bids for the Japanese currency.

The yen’s advance was modest, with the 10-year Japanese government bond yields hitting a six-month high, as traders wanted to see concrete measures from the BOJ.

“The market may be too complacent that the BOJ would be in this easy policy mode forever,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “We have to wait and see what happens.”

The BOJ, facing stubbornly low inflation, is in unusually active discussions, with changes to its interest-rate targets and stock-buying programme on the table, people familiar with the central bank’s thinking told Reuters.

The yen reached a two-week peak at 110.74 yen per dollar before retreating to 111.41 yen, little changed from Friday, Reuters data showed.

It strengthened to a two-week high at 129.87 yen per euro before retreating to 130.27 yen, up 0.26 percent on the day.

Also underpinning support for the yen were Trump’s comments in a late-night Twitter message warning Iran from making more threats against the United States.

The Japanese currency is seen as a safe-haven due to political worries.

Reporting by James Thorne; additional reporting by Richard Leong in New York; Editing by Lisa Shumaker

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