Treasury yields fall as inflation fears ease
The yield on the benchmark 10-year Treasury note fell to 1.591% at 4:20 a.m. ET. The yield on the 30-year Treasury bond dipped to 2.283%. Yields move inversely to prices.
Dollar drifts lower as Fed speakers soothe inflation fears
The dollar floated at the bottom of its recent range on Tuesday, as softer-than-expected U.S. data and fresh insistence from Federal Reserve officials that policy would stay on hold allayed investor fears about inflation forcing interest rates higher.
The British pound rose, inching back toward the three-month high reached at the end of last week. The Turkish lira edged slightly lower, largely unfazed by the removal of one of the central bank’s four deputy governors.
Investors are heavily short dollars in the belief that low U.S. rates will drive cash abroad as the world recovers from the pandemic. They have become leery of adding to positions after an April leap in inflation cast doubt on the policy outlook, but seemed to find reassurance in data and Fed remarks overnight.
“Markets appear to be coming around to the Fed narrative that a burst in inflation is only likely to be temporary,” said Rodrigo Catril, a senior FX strategist at National Australia Bank in Sydney. “A temporary spike in prices should not instigate a removal of stimulatory policies from central banks.”
The U.S. national activity index reading of 0.24 against expectations above 1, as well as dovish comments from Fed speakers, provided some backing for the view that any policy tightening is not happening any time soon.
The yen was last at 108.735 per dollar while the Aussie and kiwi drifted round the middle of ranges that have held them since April. The Aussie bought $0.7750 and the kiwi $0.7211.
Sterling, which has run up about 1.2% over the past three weeks while other majors have steadied or even slipped, was 0.2% higher at $1.41797.
The lira eased 0.1% to 8.3805 per dollar. Turkey removed Oguzhan Ozbas from his post as central bank deputy governor, replacing him with Semih Tumen, an adviser to President Tayyip Erdogan. In March, Erdogan sacked central bank chief Naci Agbal, two days after a sharp interest rate hike, and also dismissed another deputy governor later the same month.
· China state banks buy dollars to curb rapid yuan rally - sources
China’s major state-owned banks were seen buying U.S. dollars at around 6.4 yuan per dollar level on Tuesday afternoon, four sources with knowledge of the matter said, in a move viewed as an effort to curb fast yuan appreciation to breach the key level.
Reference: Reuters, CNBC
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