Yahoo Finance Rising Treasury Yields Make Dollar Attractive Asset
The U.S. Dollar closed higher against a basket of currencies on Tuesday, attempting pull away from three-year lows set last week as traders trimmed some of their bearish bets against the U.S. currency.
March U.S. Dollar Index futures settled at 89.636, up 0.623 or +0.70%.
Investors were also reacting to higher U.S. Treasury yields which made the dollar a more attractive investment. Inflation concerns continue to be the primary suspect in the recent uptick in yields, with wage and inflation data sparking volatility in equity markets worldwide over the past few weeks. Higher-than-expected wages were reported the first week of February as part of the U.S. Non-Farm Payrolls report, and last week, the Consumer Price Index came in higher-than-expected.
On Tuesday, the 2-year U.S. Treasury Note yield hit its highest level in nearly 10 years after the release of hotter-than-expected inflation data in Europe. The yield on the benchmark 10-year Treasury note was higher at around 2.89 percent, while the yield on the 30-year Treasury bond was higher at 3.151 percent.
The Treasury Department auctioned $28 billion in 2-year notes at a high yield of 2.255 percent, its highest yield at auction since August 2008.
EUR/USD
The Euro closed lower against the U.S. Dollar on Tuesday despite a jump in the yield on the 10-year German bund to 0.738 percent following the release of a stronger-than-expected German producer inflation report.
The EUR/USD settled at 1.2336, down 0.0071 or -0.57%.
Germany’s Federal Statistics Office reported that the country’s producer prices came in hotter than anticipated. January’s producer price index rose 0.5 percent month-over-month and 2.1 percent year-over-year. Economists were looking for German PPI to rise 0.3 percent on a monthly basis.
Germany’s ZEW Economic Sentiment fell to 17.8 from 20.4, but higher than the 16.0 estimate. The Euro Zone’s ZEW Economic Sentiment report was 29.3, down from 31.8, but higher than the 28.4 forecast.
The ZEW surveys indicate that the German economy is expected to improve in the next six months despite a slight deterioration in investor morale in February. Additionally, Europe’s largest economy is powering ahead on a consumer-led upswing driven by record-high employment, increased job security, rising real wages and low borrowing costs. A rebound in exports and company investments are also boosting growth, according to Reuters.
USD/JPY
The Dollar/Yen was higher on Tuesday, bouncing back from a 15-month low hit on Friday. Investors attributed the rally to short-covering after speculative selling drove the Forex pair into 105.540.
The USD/JPY settled at 107.318, up 0.736 or +0.69%.
In other news, the Yen showed little reaction to comments from Japan’s top currency diplomat, Masatsugu Asakawa, who was quoted by the Nikkei newspaper as saying that the yen’s recent moves were “one-sided”.
AUD/USD
Minutes from the Reserve Bank of Australia released on Tuesday indicated policymakers were sanguine about the uptick in the global economy. RBA member also noted that wage growth “was yet to pick up” despite the robust job market and highlighted that household debt remained “elevated.”
The AUD/USD settled at .7883, down 0.0028 or -0.35%.
NZD/USD
The New Zealand Dollar finished lower against the U.S. Dollar on Tuesday despite stronger-than-expected producer inflation data.
The NZD/USD settled at .7347, down 0.0024 or -0.32%.
New Zealand producer price index rose 1% q/q in the last quarter of 2017, higher than the Reuters’ median consensus of a 0.4% q/q increase, unchanged from the Q3 reading, according to the Stats NZ press release. The increases were primarily driven by the rise in fuel prices, which contributed to the growth in producer output and input prices in the December quarter.
Input prices grew 0.9% q/q in Q4 2017, higher than the market expectations of 0.3% q/q growth, a little lower from the Q3 reading of 1%. Input prices paid by petroleum and coal product manufacturers rose 12 percent in the December 2017 quarter, influenced by higher imported crude oil prices, reported Stats NZ.
This article was originally posted on FX Empire
