· TREASURIES-Long-end yields hit highest since June on inflation worries
A sell-off in longer-dated Treasuries extended on Wednesday, pushing benchmark 10-year yields to their highest since June, as investors worried surging energy prices could drive broader inflationary pressures.
U.S. crude futures hit an almost seven-year high on Wednesday amid a global fuel crunch that has unnerved markets and sent coal and natural gas prices soaring.
The 10-year yield rose 4.5 basis points (bps) to 1.573% during the Asia session and has now climbed nearly 11 bps in three days.
· Dollar climbs as energy surge drives inflation worries
The dollar edged higher on Wednesday amid nervousness that surging energy prices could spur inflation and interest rate hikes, and as traders awaited U.S. jobs data for clues on the timing of Federal Reserve policy tightening.
The Reserve Bank of New Zealand lifted its official cash rate for the first time in seven years but its resolutely hawkish tone only seemed to add to expectations that the Fed will follow suit and the kiwi dipped as U.S. yields rose.
The kiwi was last 0.4% weaker at $0.6928 and the Australian dollar fell by the same margin to $0.7265.
The euro was pinned below $1.16 and last bought $1.1589, scarcely higher than the 14-month low of $1.1563 it struck last week.
The yen fell to a one-week low of 111.72 per dollar in tandem with a rise in Treasury yields, which can draw investment flows from Japan. It was within range of the 18-month trough of 112.08 that it visited last Thursday.
The greenback has won support as investors brace for the Fed to begin tapering asset purchases this year and lay the ground for an exit from pandemic-era interest rate settings well before central banks in Europe and Japan.
Fed funds futures markets are priced for rate hikes to begin around November 2022, but anticipate rates topping out at just over 1% through most of 2025 even though Fed members project rates reaching 1.75% in 2024.
Longer-dated U.S. yields rose on Wednesday and the U.S. dollar index rose 0.1% to 94.082. [US/]
U.S. non-farm payrolls data due on Friday is seen as crucial to informing the Fed’s tone and timing, especially should the figures wildly impress or disappoint. Private payrolls figures, a sometimes unreliable guide, are due around 1215 GMT.
A large miss on market expectations for around 428,000 jobs to have been added in September could dampen expectations for Friday’s broader figure, which is forecast at 473,000.
Reference: Reuters, Investing
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