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US dollar gains, tracks rise in Treasury yields

NEW YORK :The U.S. dollar advanced for a second straight session on Monday, bolstered by the rise in Treasury yields ahead of a slew of Federal Reserve speakers this week who could affirm expectations of the start of asset purchase reduction before the end of the year.

U.S. benchmark 10-year Treasury yields hit a three-month high of US$1.516per cent on Monday. [US/]

Fed officials, including one influential board member, on Monday tied reduction in the Fed's monthly bond purchases to continued job growth, with a September employment report now a potential trigger for the central bank's bond "taper."

Fed Chair Jerome Powell, who will join Treasury Secretary Janet Yellen, speaks before Congress on Tuesday.

The dollar index, which measures the U.S. currency against six major rivals, rose 0.1per cent to 93.37.

The greenback also extended gains after data showed new orders and shipments of key U.S.-made capital goods increased solidly in August, rising 0.5per cent in August amid strong demand for computers and electronic products.

But the market has been more focused on the U.S. Treasury market.

U.S. yields climbed to their highest since late June in anticipation of tighter monetary policy after the Fed announced last week it may start tapering stimulus as soon as November and flagged interest rate increases may follow sooner than expected.

"As much as taper in and of itself is not a surprise, an earlier end to its program will reinforce that downside risks to the U.S. dollar have diminished," Mazen Issa, senior FX strategist at TD Securities, wrote in a research note.

TD expects the Fed to end its quantitative easing program by June 2022.

"If the last taper cycle was any indication, about half of the U.S. dollar's cyclical upswing was observed three months after taper," he added.

The euro slipped 0.1per cent against the dollar to US$1.1698, largely ignoring developments in German elections over the weekend, with the Social Democrats projected to narrowly defeat the CDU/CSU conservative bloc.

The dollar rose 0.3per cent versus the yen to 110.99 yen, after earlier rising to a nearly three-month high. It gained 0.2per cent versus the Swiss franc to 0.9259 francs.

"The buck has no real reason to decline from where it is, so it will be about looking for what may actually change that as we hear from various sides this week: a new German leadership, a new Japanese head of state, and the U.S. Congress," said Juan Perez, FX strategist and trader at Tempus Inc in Washington.

The risk-sensitive Australian dollar rose 0.4per cent to USUS$0.7289 as fears of widespread market contagion from indebted China Evergrande Group ebbed.

Concerns that Evergrande, China's second-largest developer, could default on its US$305 billion of debt have overshadowed trade in recent weeks, but some of those contagion fears are receding.

The People's Bank of China injected a net 100 billion yuan (US$15.5 billion) into the financial system on Monday, adding to the net 320 billion yuan last week, the most since January.

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Currency bid prices at 3:08 PM (1908 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.3840 93.2680 +0.13per cent 3.782per cent +93.4940 +93.2060

Euro/Dollar US$1.1698 US$1.1722 -0.20per cent -4.25per cent +US$1.1730 +US$1.1685

Dollar/Yen 111.0000 110.7350 +0.25per cent +7.44per cent +111.0600 +110.5300

Euro/Yen 129.84 129.75 +0.07per cent +2.30per cent +129.9300 +129.4900

Dollar/Swiss 0.9260 0.9243 +0.19per cent +4.67per cent +0.9291 +0.9246

Sterling/Dollar US$1.3707 US$1.3670 +0.29per cent +0.34per cent +US$1.3729 +US$1.3661

Dollar/Canadian 1.2620 1.2657 -0.27per cent -0.88per cent +1.2672 +1.2610

Aussie/Dollar US$0.7289 US$0.7257 +0.42per cent -5.26per cent +US$0.7291 +US$0.7250

Euro/Swiss 1.0831 1.0831 +0.00per cent +0.22per cent +1.0864 +1.0825

Euro/Sterling 0.8534 0.8565 -0.36per cent -4.51per cent +0.8583 +0.8528

NZ US$0.7019 US$0.7015 +0.06per cent -2.26per cent +US$0.7033 +US$0.6990

Dollar/Dollar

Dollar/Norway 8.6030 8.5970 +0.10per cent +0.22per cent +8.6090 +8.5530

Euro/Norway 10.0653 10.0623 +0.03per cent -3.84per cent +10.0870 +10.0250

Dollar/Sweden 8.6972 8.6462 +0.36per cent +6.11per cent +8.7080 +8.6294

Euro/Sweden 10.1741 10.1380 +0.36per cent +0.97per cent +10.1898 +10.1165

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Ritvik Carvalho in London; Editing by Steve Orlofsky, Nick Macfie and Jonathan Oatis)

Source: Reuters

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