Dollar nurses losses as bond yield rises

- Reuters, LONDON

Jan 30, 2018-

The dollar consolidated losses against a basket of currencies on Monday as US bond yields rose but traders were cautious on the broader outlook as recent strong data has not changed expectations about the path of US interest rates.

Data on Friday showed U.S economic growth accelerated to 2.3 percent in 2017, faster than the 1.5 percent logged in 2016, although growth in the December quarter slowed on a sequential basis and was below market expectations.

Lee Hardman, a currency strategist at MUFG, said the strong data should encourage the Fed to adopt a more confident tone in this week’s policy meeting and will only cement expectations of another rate hike in March.

But “the updated signal is unlikely to prove sufficient to prompt the market to price in more rapid tightening beyond the Fed’s current plans for three hikes this year, thereby dampening support for the US dollar”, he added.

Treasury Secretary Steven Mnuchin gave US currency bears a major boost last week with a tacit endorsement of a weak dollar. While US President Donald Trump, who has advocated a strong dollar, tried to row back from those comments, the damage had already been done and the greenback’s downturn since November showed little sign of abating.

Against a basket of currencies .DXY, the dollar bounced a quarter of a percent higher to 89.30 after scoring six consecutive weeks of losses.

On a monthly basis it is set to fall 3 percent.

Over the last decade, including the global financial crisis in 2008, it has fallen by that extent only 10 times, according to Thomson Reuters data.

Reuters data points to market expectations of about three more Federal Reserve rate hikes this year, starting in March, although some analysts, including at Goldman Sachs and JP Morgan Asset Management expect the Fed to raise four times.

US Treasury yields climbed to fresh multi-year highs in European trade on 

Monday, extending rises seen last week as investors braced for major central banks to step back from ultra-easy monetary policies. The 10-year yield rose to 2.71 percent, its highest since early 2014.

Published: 30-01-2018 08:44

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