Dollar gains with yields, U.S. growth seen likely to outperform
The dollar gained on Wednesday as investors priced for strong U.S. growth relative to other regions, while the safe haven Japanese yen weakened to a seven-month low.
Investors have boosted bets on U.S. growth and inflation as the government prepares new fiscal stimulus, and speculation is rising that the Federal Reserve could also be closer to normalizing monetary policy than previously expected.
Data on Wednesday showed that the euro zone economy is almost certainly in a double-dip recession as COVID-19 lockdowns continue to hammer the services industry.
U.S. data also showed that private payrolls rose by 117,000 jobs last month, according to the ADP National Employment Report, missing expectations.
However, “expectations are for stronger hiring” when the U.S. releases jobs data for February on Friday, Manimbo said.
The dollar index was last up 0.14% at 90.924.
The euro dipped 0.19% to $1.2068.
The U.S. currency has also benefited from a rise in U.S. Treasury yields. Benchmark 10-year yields on Wednesday rose to 1.469%, though they are below a one-year high of 1.614% reached last week.
Comments by Federal Reserve Chairman Jerome Powell on Thursday will be closely evaluated for any indications that the Fed is uncomfortable with the recent yield increases. He is speaking at an event on the U.S. economy.
Chicago Federal Reserve Bank President Charles Evans on Wednesday said he sees the recent rapid rise in bond yields as mostly reflecting improvements in the economy.
The safe haven Japanese yen continued to fall, reaching 107.15 yen, the weakest since July 23.
Technical analysts at Citi said that the yen could strengthen if Treasury yields stabilize at lower levels following Powell’s appearance, and ahead of the blackout period for Fed speakers before the Fed’s March 16-17 meeting.
The yen could reach support at 106.11 to 106.22, or even continue further to the 105.33-105.44 area, Citi said.
Sterling steadied against the dollar on Wednesday and gained against the euro after the announcement of an expansive budget designed to prop up the British economy as it prepares for a re-opening from lockdown.
It was last up 0.03% on the day at $1.3955.
Reference: Reuters
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