Dollar at 4-week low on retreating Treasury yields
The dollar fell to a four-week low against a basket of currencies on Friday, still smarting from a sharp drop in U.S. Treasury yields the previous session, and as investors increasingly bought into the Federal Reserve’s insistence it would keep an accommodative policy stance for a while longer.
The benchmark 10-year U.S. Treasury yield dipped to a one-month low of 1.528% overnight, moving further away from March’s 1.776%, its highest in more than a year, even in the face of Thursday’s stronger-than-expected retail sales and employment data. On Friday, the 10-year recovered some ground to trade at 1.5675%.
Minh Trang, Senior FX trader at Silicon Valley Bank, cited some profit-taking after the greenback’s sharp appreciation in March as well as the recent retreat in Treasury yields as main reasons for the dollar’s weakness.
The dollar index measuring the greenback against a basket of six currencies was 0.111% lower at 91.561, its lowest since March 18. For the week the index was down 0.7%, set for its second straight weekly decline.
San Francisco Fed President Mary Daly said the U.S. economy was still far from making “substantial progress” toward the central bank’s goals of 2% inflation and full employment, the bar the Fed has set for beginning to consider reducing its support for the economy.
That echoed Fed Chair Jerome Powell’s comments in several speeches over the past week that policymakers will look through near-term rises in prices amid ongoing slack in the labor market.
On Friday, the U.S. Treasury Department said it will continue enhanced engagement with Vietnam and Switzerland, and initiate similar talks with Taiwan after concluding all three countries met the criteria under a 2015 U.S. currency manipulation law.
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