Dollar hits one-week high amid rising US yields, ECB cautious

TOKYO, Sept. 8 (Reuters) – The dollar hit a one-week high against its major peers on Wednesday, supported by rising Treasury yields and a weaker euro ahead of a European Central Bank policy move.

The dollar index, which measures the currency against six rivals, rose 0.05% to 92.580, after hitting 92.590 previously, a level not seen since September 1.

The euro slipped 0.05% to $ 1.1836 for the first time since September 2.

The greenback gained 0.08% to 110.385 yen, helped by rising US yields.

The benchmark 10-year Treasury note hit 1.385% on Tuesday for the first time since mid-July, up nearly 6 basis points from Friday’s close. Monday was a public holiday in the United States.

The dollar index had fallen to its lowest levels since early August until the end of last week, when a surprisingly weak US wage report sparked speculation the Federal Reserve would back off announcing a cut stimulus measures at a political meeting this month. At the same time, strong wage growth has warned of the potential for rising inflationary pressures.

The strength of the dollar this week appears to be the result of a shift in investor focus towards wage growth, which “suggests the Fed may stick with its cut plan,” wrote Ken Cheung, strategist at Mizuho Bank in Hong Kong, in a report.

“We are looking for further hikes for the USD.”

However, the surge in COVID-19 deaths in the United States could give the central bank pause. Reuters data shows more than 20,800 people have died from the virus in the past two weeks, about two-thirds of the previous period. President Joe Biden will present a plan to tackle the highly contagious Delta variant on Thursday. Read more

Investors will look to a speech by New York Fed Chairman John Williams later Wednesday on whether the labor market is still on the Fed’s announced track of “substantial further progress” needed for a cut.

St. Louis Fed Chairman James Bullard told the Financial Times the central bank should move forward with a plan to start cutting stimulus this year despite the slowdown in employment in the month latest. Read more

“Risk aversion in the air along with rising UST yields have helped the dollar extend its post-payroll recovery,” Rodrigo Catril, senior currency strategist at National Australia Bank, wrote in a client note.

“Investors are wary of the ECB meeting on Thursday, anticipating a potential reduction in the pace of purchasing Pandemic Emergency Purchase Program (PEPP) bonds.”

Analysts polled by Reuters see PEPP purchases drop to 60 billion euros per month from the current 80 billion, before falling again early next year and the program ends in March. Read more

Elsewhere, the Reserve Bank of Australia’s decision on Tuesday to go ahead with cutting bond purchases while adding the accommodating concession to extend the program until February, helped undermine the Australian dollar. . It slipped 0.07% to $ 0.73825 on Wednesday, extending the 0.7% decline from the previous session.

The Canadian loonie was broadly stable at C $ 1.2641 against the greenback after falling about 0.9% overnight.

Falling oil prices weighed in, as investors anticipate a conciliatory speech from the Bank of Canada policy meeting later Wednesday following an unexpected economic contraction in the last quarter, NAB’s Catril said.

Meanwhile, cryptocurrencies struggled to rebound after heavy losses overnight, when several trading platforms said they encountered performance issues, although it was not clear whether they were a factor or result of volatility. Read more

Bitcoin slipped 1% to around $ 46,400 after falling to $ 42,900.01 on Tuesday. Earlier today, it hit an almost four-month high of $ 52,956.47.

Reporting by Kevin Buckland Editing by Shri Navaratnam and Kim Coghill

Our Standards: Thomson Reuters Trust Principles.