The dollar rose on Wednesday after finding support. U.S. yields surged forward, pushing the U.S. currency higher against the Japanese yen. Traders wagered on a broader and deeper U.S. coronavirus recovery.
The yield on 10-year U.S. debt made its steepest gain in two months overnight ahead of a record $38 billion auction which is due later on Wednesday. As a result, the greenback climbed up by 0.5% against the Japanese yen to 106.53. However, traders are still focused on the political holdup in Washington over a new stimulus package.
According to Rodrigo Catril, NAB senior FX strategist, the rise in yields is driven by both repositioning ahead of the big issuance this week and a sense that the U.S. recovery is broadening. He also added that while Dollar/yen pair is very sensitive, higher U.S. Treasury yields should be broadly supportive for the dollar.
The dollar continued surging forward against a basket of currencies, trading at 93.654 at last. After a long downfall, the U.S. currency soared last Friday as U.S.-China tensions rose higher. President Donald Trump banned Chinese apps – TikTok and WeChat, causing the rift to widen.
On the other hand, the greenback was steady at $1.1740 against the euro. It was also firm against the Australian dollar, trading just below a one-week high at $0.7147.
How much did the dollar lose?
Thus far, the dollar index has tumbled down by 9% from a three-year high it hit in March. The currency lost 4% in July alone. Traders argue over whether the support the dollar has found in August amounts to a bounce or a pause in its decline.
In Asia, the New Zealand dollar plunged to a three-week low, trading at $0.6564 on Wednesday. Analysts are waiting for a crucial central bank policy decision, which is due later. While they don’t expect any change in rates, a dovish tone is likely, especially considering that Auckland is under lockdown again because four new coronavirus cases were detected after 102 virus-free days.
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