FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration
March 1, 2019
By Tommy Wilkes
LONDON (Reuters) – The dollar moved higher on Friday, hitting a 10-week high against the yen, as a jump in U.S. Treasury rates sent investors chasing higher yields into the greenback.
The U.S. currency managed to claw back earlier losses after data showed U.S. gross domestic product increased at a 2.6 percent annualized rate in the fourth quarter, above economists’ forecasts for a 2.3 percent gain.
With U.S. interest rates higher than in other developed economies, investors have been turning to the dollar for yield.
“What’s the dollar rebound on? Is it sentiment or yield? The answer is it’s just about yield,” said Simon Derrick, currencies analyst at BNY Mellon.
The yen was the main casualty from the dollar’s rise, losing as much as half a percent to 111.98 yen, a 10-week low.
The Japanese currency, along with fellow safe-haven currency Swiss franc, had been supported earlier in the week when tensions between India and Pakistan and the collapse of U.S.-North Korea talks rattled markets.
Against a basket of rival currencies the dollar rose 0.1 percent to 96.259.
Graphic: U.S. dollar vs the yen (https://tmsnrt.rs/2C0JWI2)
It was a quiet end to the week elsewhere, with most major currencies stuck in tight trading ranges.
The euro slipped 0.1 percent to $1.1360 before stabilizing at $1.1373, keeping the single currency firmly in a trading range against the dollar it has been stuck in for several months.
While the U.S. Federal Reserve in January rowed back on its policy tightening plans, other central banks appear to have followed – crushing volatility and leaving major currency pairs like euro/dollar treading water.
“January’s central bank policy pivot which, depending on your bias, is either a counter-attack in the face of mounting threats to growth and inflation, or a retreat in the face of the asset market weakness at the end of 2018, points to a protracted period of low volatility in currency markets,” Societe Generale strategist Kit Juckes wrote in a note to clients on Friday.
The Australian dollar rose 0.2 percent to $0.7106 as investors’ mood improved.
The Aussie had skidded lower on Thursday after a disappointing reading on Chinese manufacturing overshadowed a solid report on domestic business investment.
The Canadian dollar rose 0.3 percent to C$1.3138. The loonie, as it is known, has strengthened in 2019 on higher crude oil prices and as investors’ appetite for risk has rebounded from end-of-2018 nerves.
The benchmark 10-year U.S. Treasury yield rose to 2.7204 percent after surging to 2.731 percent on Thursday, its highest since Feb. 6.
Graphic: U.S. 10-year Treasury yield (https://tmsnrt.rs/2BWGoqi)
Sterling slipped to $1.3241 after its gains of the past week. Investors have bought back into the pound in the belief Britain will avoid a disorderly Brexit and could delay its departure from the European Union.
(Editing by Peter Graff/Keith Weir)
