Dollar set for a first monthly gain

On Tuesday, the US dollar resumed its upward trend, reclaiming its first monthly increase since September with increased value against the pound and euro from the day before.

The dollar index was flat at 104.63, still up 2.62% from February; its first monthly increase since September.

Investors now expect federal funds to exceed 5.43% in September, compared to the expected peak at the beginning of the month.

US Treasury yields are also higher, with inflation–sensitive two–year yields hitting three–month highs.

On Tuesday, the dollar particularly gained against the Japanese yen, up 0.45% to 136.85, its highest in two months. Japan‘s policy to maintain yields means the yen is susceptible to yields elsewhere. However, the incoming Bank of Japan Governor commented that it is premature to comment on how the central bank could change policy. The yen has also weakened against the euro and the pound for two months.

Sterling and euro

Elsewhere, sterling strengthened against the dollar from the previous session, up 0.36% to $1.2105. It rose 1% after Britain and the European Union announced a new deal on further trade agreements in Northern Ireland, known as the ‘Windsor Framework’. This drove the prospect of a post–Brexit British economy; British Prime Minister Rishi Sunak said this marks a new chapter in London‘s relationship with the EU.

The euro stayed at $1.0618, up 0.72% in the previous session.