US dollar, bond yields climb

The US dollar rose from its lowest level in more than a year and US Treasury yields climbed yesterday as investors braced for news from this week’s US central bank meeting and possible hints on when the next interest rate hike is coming.

Further developments in Washington, including on US President Donald Trump’s inner circle’s possible ties to Russia, as well as weak US economic data and reduced inflation expectations, have weighed on the dollar for much of the month.

The dollar rose against a basket of six major currencies, bouncing off a 13-month low in early trading, buoyed by strong US data yesterday. The dollar index  was last trading 0.15 per cent higher at 94.006.

Many analysts and investors expect the Federal Reserve to announce that it will begin reducing its bond portfolio at its September meeting, but will await firmer indications on the timing of this effort at this week’s meeting which begins Tuesday.

Further interest rate hikes are not seen as likely until December. Futures traders are pricing in a 47-per cent chance that the Fed will raise rates at its December meeting, according to the CME Group’s FedWatch Tool.

Benchmark 10-year notes  were last down 4/32 in price to yield 2.25 per cent, up from 2.23 per cent on Friday.

The yields have fallen from 2.40 per cent on July 7. Treasuries have rallied in the past two weeks on what analysts said are mainly technical factors.

“Momentum that had been oversold is shifting increasingly to overbought, which sets this week up to be about the data and about the Fed,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

Data this week includes US gross domestic product for the second quarter which is due on Friday.

The dollar rose against a basket of six major currencies, bouncing off a 13-month low touched in early trading. The dollar index  was last trading 0.15 per cent higher at 94.006.

The euro earlier hit an almost two-year high against the dollar, largely shrugging off regional data showing euro zone business growth slowed last month and weighing on exporters’ shares.

The euro was last trading at $1.1634, slightly below a high of $1.1684 hit earlier in the day, its highest since August 2015.

Stocks on global markets slipped, with US stock indexes down slightly. Johnson & Johnson’s  shares fell 1.5 per cent after South Korea’s Samsung Bioepis said it started US sales of the company’s top-selling drug Remicade.

The Dow Jones Industrial Average was down 68.13 points, or 0.32 per cent, to 21,511.94, the S&P 500 had lost 4.44 points, or 0.18 per cent, to 2,468.1 and the Nasdaq Composite  had dropped 1.70 points, or 0.03 per cent, to 6,386.05. European shares were also down.

Leave a Reply

Your email address will not be published.

nineteen + 16 =