Sun, July 21, 2024

Dollar steadied after it seesawed with bond market volatility

dollar

The dollar held steady after seeing bond markets falter as investors eyed U.S. economic data. Meanwhile, the dollar index advanced 0.112% to 101.84 in Asian trade after retreating 0.37% on Tuesday, reversing the previous session’s 0.54% rally.

Two-year U.S. Treasury yields hit a near one-month high of 4.232% overnight and remained higher in Tokyo trading on Wednesday.

The head of the St. Louis Fed said in an interview that he is leaning toward 75 bps of tightening next, against the market consensus for another 25 bps hike next month.

The dollar’s retreat on Tuesday was also helped by a fall in demand for its haven after Attrill described China’s economic growth data as a “blockbuster” on the day, which lifted the risk-sensitive Australian currency.

Currencies

The Australian dollar retreated 0.062% to $0.67244.

The euro was steady at $1.09724 after advancing 0.42% on Tuesday. Sterling dropped by 0.09% to $1.2412. The two currencies have advanced 4-5% against the dollar since March as market volatility caused by bank stress subsides.

The euro traded below $1 in September and is now worth around $1.11, the highest in more than a year.

The dollar advanced 0.17% to 134.32 yen after falling 0.29% on Tuesday.

The financial markets expect the U.S. Federal Reserve to raise interest rates by an additional 25 basis points in May and then decrease them soon after. But markets expect a further 75 bps rate hike from the European Central Bank, with the deposit rate peaking in the fall.

Figures this week showed that wages and inflation in Britain rose faster than expected last month, with inflation above 10% – the highest in Western Europe.

Expectations of higher official interest rates typically boost the money market, attracting investors to a cash-strapped country and boosting its currency.

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