U.S. dollar is soaring. What about the New Zealand dollar?

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.