Dollar strengthens as US yields are higher on Fed mantra

TOKYO (Reuters) – The safe haven US dollar strengthened again on Friday, supported by rising Treasury bill yields and falling stock markets, as investors continued to digest resistance from the Federal Reserve against the expectations of any anticipated rise in interest rates.

The dollar index added 0.1%, extending a 0.5% jump from Thursday, which was the highest in two weeks.

The US 10-year benchmark yield soared to a more than a year high of 1.754% overnight before falling back to 1.715%, while Asian stocks followed Wall Street lower.

The Federal Open Market Committee (FOMC) this week pledged to continue with aggressive monetary stimulus, saying a short-term spike in inflation would prove temporary amid their projections of the strongest U.S. economic growth in nearly 40 years old.

The next focus for the currency market will be the Bank of Japan’s policy decision on Friday, accompanied by the results of a comprehensive policy review.

“After looking at the navel,” bond investors “concluded that the Fed is not (posing) any challenge or embarrassment for longer-term UST yields to continue to push higher,” wrote Rodrigo Catril, senior strategist in currency of the National Australia Bank, in a customer note.

“The USD has regained its mojo.”

The greenback gained 0.1% to 109.04 yen, adding to small gains overnight.

The yen got some support from a Nikkei report on Thursday that the BOJ is expected to slightly widen an implied band in which it allows long-term interest rates to move around its 0% target.

The euro slipped 0.1% to $ 1.1908, extending Thursday’s 0.5% drop.

With AstraZeneca vaccinations set to restart in Germany, France and other European countries, the region’s growth prospects were grim as Paris entered a month-long lockdown.

The British pound fell 0.2% to $ 1.3903 after weakening 0.3% a day earlier as the Bank of England warned that Britain’s prospects for recovery remain uncertain, which dampened some speculation that the bank would signal a more confident outlook.

In the cryptocurrency market, bitcoin weakened to around $ 56,703 at the start of Asian trading, after slightly exceeding $ 60,000 overnight.

It had hit a new record high of $ 61,781.83 on Saturday, after more than doubling since the start of the year.

“Bitcoin is a dynamic trade and it looks like it could go much further,” said Edward Moya, New York-based senior market analyst at online broker OANDA.

“Is it a bubble? Yes. But it can easily reach $ 100,000 before it collapses. “

=================================================== = ======

Bid price for currencies at 116 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous change

Session

Euro / Dollar $ 1.1906 $ 1.1916 -0.08% -2.55% +1.1921 +1.1904

Dollar / Yen 109.0650 108.9100 + 0.11% + 5.56% +109.0920 +108.9300

Euro / Yen 129.85 129.76 + 0.07% + 2.31% +129.9200 +129.7700

Dollar / Switzerland 0.9282 0.9274 + 0.09% + 4.92% +0.9283 +0.9273

Pound sterling / dollar 1.3901 1.3932 -0.19% + 1.79% +1.3931 +1.3900

Dollar / Canadian 1.2502 1.2486 + 0.14% -1.81% +1.2505 +1.2484

Aussie / Dollar 0.7734 0.7762 -0.32% + 0.57% +0.7762 +0.7736

NZ 0.7154 0.7168 -0.17% -0.35% +0.7171 +0.7155

Dollar / Dollar

All spots

Tokyo spots

Spots in Europe

Volatilities

BOJ Tokyo Forex Market Information