Dollar hits 4-month high against yen as yields jump on
inflation bets
Wed Feb 17 2021
Boosting the dollar was soaring US bond yields, with
the10-year yield rising to 1.331 per cent
The dollar advanced on Wednesday,hitting a four-month high
against the yen as US bond yields jumped on the prospects of further economic
recovery and a possible acceleration in inflation.
Bitcoin held firm, a day after the cryptocurrency hit
$50,000 for the first time, bringing its total market capitalisation to more
than $900 billion, as traders bet on its further acceptance among major
companies.
The dollar's index against six other major currencies jumped
back to 90.681, from a three-week low of 90.117 it hit on Tuesday.
Boosting the dollar was soaring US bond yields, with
the10-year yield rising to 1.331 per cent from around 1.20 per cent at the end
of last week.
"The move up in yields has been driven by increasing
inflationary concerns amid a rise in energy prices along with the prospect of a
big US fiscal stimulus and the global recovery entering a more solid stage as
vaccine rollout lead to the reopening of economies," said Rodrigo Catril,
senior FX strategist at National Australia Bank in Sydney.
The yen, which is sensitive to US yields, reacted the most,
with the dollar jumping to a four-month high of 106.225 yen. It last stood at
106.13 yen.
"I think the dollar's downtrend is over. At the start
of the year, speculators were betting on a fall in the dollar below 100 yen.
They seem to have abandoned such a view now," said YukioIshizuki, senior
strategist at Daiwa Securities.
The euro slipped slightly to $1.2085 though its fall was
less pronounced due to its gains earlier on Tuesday following strong German
economic sentiment data.
The New York Federal Reserve's Empire State manufacturing
report released on Tuesday offered an upbeat economic picture, with a rise in
its "prices paid index" stoking fear of faster inflation.
That optimism was echoed by St. Louis Fed President James
Bullard, who told CNBC that US financial conditions were"generally
good," and that inflation was likely to heat up this year.
San Francisco Fed President Mary Daly, however, said
pressures on inflation are still downward, pushing against critics warning low
interest rates and government spending couldoverheat the U.S. economy and spark
high inflation.
"Her comments are not resonating with market players
preoccupied with inflation at this point," said Daiwa'sIshizuki.
The positive mood on the economic outlook is underpinning
risk-sensitive currencies.
The British pound held firm at $1.3863, having reached its
highest level since April 2018 on Tuesday. Against the euro, the pound traded
at its highest level since early May at 87.07 pence per euro.
The Australian dollar stood at $0.7734, down slightly but
still not far from Tuesday's one-month high of$0.7805.
The offshore Chinese yuan also stepped back after hitting a
2-1/2-year high of 6.4010 per dollar and last stood at 6.4269.
Source: Reuters