MTS Help Center

  

Dollar buoyant as economic outlook brightens, doubts surround euro

10-year yield cuts gain after data shows subdued inflation

The 10-year U.S. Treasury yield came off its high on Friday as the latest inflation data showed tamed price pressures.

The yield on the benchmark 10-year Treasury note last traded up 3 basis points to 1.65%. The rate jumped 6 basis points earlier. The yield on the 30-year Treasury bond rose to 2.394%. Yields move inversely to prices.

On the inflation front, the core personal consumption expenditure price index, which strips out volatile food and energy prices, rose 0.1% month over month, matching expectations from economists polled by Dow Jones. Year over year, the gauge climbed 1.4%, slightly lower than a 1.5% estimate.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 1.0% last month after rebounding 3.4% in January, the Commerce Department said on Friday.

Personal income tumbled 7.1% after surging 10.1% in January. Economists polled by Reuters had forecast consumer spending decreasing 0.7% in February and income declining 7.3%.

The dollar held near its highest since November against most major currencies on Friday, buoyed by hopes over improving U.S. economic data and the availability of coronavirus vaccines, while the euro recovered from heavy losses a day before.

Against a basket of six major currencies, the dollar stood at 92.793, not far off a four-month high hit a day earlier and on course for a weekly gain of 0.9%. In further signs of strength, the dollar rose to 109.44 against the Japanese yen, its highest since June. Against the Swiss franc, it rose to its highest since July, holding onto a 0.5% gain from the previous session.

U.S. jobless claims fell to a one-year low last week and President Joe Biden said he will double his vaccination plan after reaching his previous goal of 100 million shots 42 days ahead of schedule, both of which support optimism in the dollar.

A resurgence of COVID-19 cases in major economies such as the euro zone has also favoured, he added.

The dollar’s gains in the past few weeks have been so rapid that some analysts are warning against chasing the dollar higher from current levels.

“We believe recent moves in FX markets are corrective and not part of a new 2021 trend,” ING analysts wrote in a note.

The euro managed to come back from Thursday’s four-month low, with the common currency bruised by doubts over the slow pace of vaccinations.

Against the euro, the dollar slipped 0.1% to $1.17630 but remained near its strongest level since November.

Germany’s Ifo survey later on Friday is expected to show an improvement in business morale.

That’s unlikely to halt the euro’s slide, though. Worries about the European Union’s slow vaccination rollout and bickering with former member Britain over vaccine exports have become a dominant theme, traders said.

A notable exception to the dollar’s gains was the British pound, which gained 0.3% to $1.37735 after rising 0.4% on Thursday.

 

Reference: CNBC