FOREX-Dollar rallies as U.S. economic optimism boosts Treasury yields

  • Reuters
  • Forex News
FOREX-Dollar rallies as U.S. economic optimism boosts Treasury yields
Credit: © Reuters.

* Dollar index hits four-month high

* Dollar/yen climbs to one-year peak

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (Adds new comment, updates prices, changes byline, dateline; previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, March 30 (Reuters) - The dollar rose against major currencies on Tuesday and climbed to a one-year high against the yen as increasing U.S. vaccinations and plans for a major stimulus package stoked inflation expectations and lifted U.S. Treasury yields.

Benchmark 10-year Treasury yields rose to 14-month highs on Tuesday at 1.776%, and were last up 2 basis points on the day at 1.742%.

Treasury yields are rising a day before President Joe Biden is set to outline how he intends to pay for a $3 trillion to $4 trillion infrastructure plan. acceleration of the vaccine rollout and the size of the infrastructure plan are causing yields to rise and the dollar is benefiting," said John Doyle, vice president of dealing and trading at Tempus Inc. in Washington.

The safe-haven dollar found support across the board as investors also digested the fallout from the collapse of highly leveraged investment fund Archegos Capital. dollar index rose above the 93 mark and was last up 0.4%at 93.288. It hit a high of 93.357 =USD , its highest level in four months.

The dollar also rose above 110 yen, a level not seen since March last year, and was last up 0.5% on the day at 110.375 yen JPY=EBS . The greenback was on track for its best month since late 2016.

Analysts said the yen was also vulnerable to higher inflation expectations in the United States than in Japan and a rise in long-term U.S. yields. The dollar/yen pair typically has a positive correlation with long-term U.S. yields.

The euro, meanwhile, weakened on the day to $1.1711, its lowest level since early November. It was last down 0.3% to $1.1728 EUR=EBS .

Tougher coronavirus curbs in France and Germany have dimmed the short-term outlook for the European economy. A widening spread between U.S. and German bond yields is adding pressure on the euro.

The spread between U.S. and German 10-year yields has widened the most since January of last year.

Investors will watch closely the monthly U.S. non-farm payrolls on Friday, with Federal Reserve policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest rates.

"In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support," Rabobank currency strategist Jane Foley wrote in a report.

However, "the market is in danger of pricing in too much inflation risk," meaning "we see scope for the USD to soften in the months ahead," the report said.

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Currency bid prices at 10:41AM (1441 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

93.2340

92.9030

+0.37%

3.615%

+93.3570

+92.8820 Euro/Dollar

EUR=EBS

$1.1727

$1.1767

-0.34%

-4.02%

+$1.1778

+$1.1711 Dollar/Yen

JPY=EBS

110.3300

109.8350

+0.46%

+6.79%

+110.4200 +109.7500 Euro/Yen

EURJPY=

129.38

129.20

+0.14%

+1.94%

+129.5400 +129.1800 Dollar/Swiss

CHF=EBS

0.9432

0.9394

+0.41%

+6.61%

+0.9438

+0.9389 Sterling/Dollar GBP=D3

$1.3727

$1.3760

-0.20%

+0.52%

+$1.3783

+$1.3707 Dollar/Canadian CAD=D3

1.2625

1.2590

+0.29%

-0.84%

+1.2647

+1.2581 Aussie/Dollar

AUD=D3

$0.7616

$0.7632

-0.23%

-1.01%

+$0.7664

+$0.7601 Euro/Swiss

EURCHF=

1.1058

1.1051

+0.06%

+2.32%

+1.1067

+1.1045 Euro/Sterling

EURGBP=

0.8541

0.8542

-0.01%

-4.43%

+0.8554

+0.8524 NZ

NZD=D3

$0.6987

$0.7001

-0.19%

-2.69%

+$0.7033

+$0.6975 Dollar/Dollar

Dollar/Norway

NOK=D3

8.5500

8.5485

+0.01%

-0.44%

+8.5890

+8.5460 Euro/Norway

EURNOK=

10.0292

10.0426

-0.13%

-4.18%

+10.0795

+10.0247 Dollar/Sweden

SEK=

8.7486

8.6906

+0.26%

+6.74%

+8.7638

+8.6832 Euro/Sweden

EURSEK=

10.2597

10.2328

+0.26%

+1.82%

+10.2695

+10.2194

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates

https://tmsnrt.rs/2RBWI5E

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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