Dollar nears five-year high yen as US yields rise on hawkish Fed – World Affairs SRS

Dollar nears five-year high yen as US yields rise on hawkish Fed

– World Affairs SRS

by Kevin Buckland

TOKYO (Reuters) – The dollar hovered near the yen’s five-year high on Thursday, supported by an increase in US Treasury yields on rising bets for a Federal Reserve rate hike until March.


The greenback stood at 116.115 yen, little changed from Wednesday, when it edged up to Tuesday’s high of 116.355, lifted by more flamboyant rhetoric from a Fed official and a strong US jobs report.

With the British pound retreating from nearly two-month highs and the cryptocurrency sliding towards multi-month lows, bullish assets are riskier in anticipation of a tightening of policy.

Fed officials said a “very tight” US labor market could soon warrant a rate hike, and indicated they could also reduce the central bank’s overall asset holdings to tame high inflation – a process The minutes of their December 14-15 policy meeting – called quantitative tightening (QT) – were shown.

In light of this, the price of futures on the federal funds rate at its March meeting poses an almost 80% chance of a quarter-percentage-point Fed hike.

Earlier in the day, the ADP National Employment Report showed private US payrolls had increased last month by more than double what economists polled by Reuters had forecast, potentially due to Friday’s non-payment of wages. Raising expectations for agricultural payroll numbers.

“With rate hikes in March and the threat of QT this year, USD should maintain a resilient form,” strategists at TD Securities wrote in a report.

“This should support USDJPY over time, although we think a very bullish Fed could cause some short-term upside for riskier markets.”

The US dollar index, which measures the currency against the yen and five other major peers, was nearly flat at 96.209 since Wednesday, when it edged up as much as 0.44% from intraday losses after the minutes’ release.

Five-year Treasury yields, which are highly sensitive to interest rate expectations, rose to near two-year highs.

Despite a more-hawkish Fed in recent months, which signaled three quarter-point rate hikes for the year at its December policy meeting, gains for the dollar index hit a 16-month high of 96.938 in late November. has since stabilized.

George Davis, a strategist at RBC, wrote in a report pointing to the euro, sterling, “trend and momentum dynamics remain in favor of the USD, but in most cases prices will be pushed back to Q4 to resume the uptrend.” The high level of 2021 has to be hit.” And especially the Australian dollar.

The euro stood at $1.1310 since mid-November, consolidating in the middle of its trading range. It fell to $1.1186 on November 24 for the first time since July 2020.

Sterling traded at $1.3550, after Fed minutes retreated overnight from a nearly two-month high of $1.3599.

The Australian fell to $0.7215 from an intraday high of $0.7273 on Wednesday.

In crypto, bitcoin stabilized around $43,600 after falling to a one-month low of $42.413.59 in the previous session.

After falling overnight to $3,410.22 for the first time since mid-October, Ether recovered somewhat to trade around $3,500.

(Reporting by Kevin Buckland; Editing by Sam Holmes)

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is generated automatically from a syndicated feed.)

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