US dollar supported as US yields rise to 1-month highs

[TOKYO] The US dollar was steady against a basket of its peers on Thursday, supported by higher long-term US Treasury yields on improving investor appetite for risk assets, though lingering concerns over US-China trade tensions checked the greenback.

The US dollar index against a group of six major currencies was flat at 89.635 after edging up 0.1 per cent on Wednesday.

The US currency was steady at 107.250 yen having advanced 0.2 per cent the previous day.

However, the US dollar's gains were limited given the scope of the rise by the 10-year Treasury note yield, which climbed more than five basis points overnight for its biggest one-day surge since March 2.

"The dollar, particularly against the yen, has began re-establishing a correlation with widening yield differentials this month," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"While the spreads between US yields and those in Japan and the euro zone continue to widen, the dollar cannot take full advantage due to lingering 'Trump risk'," Mr Ishikawa said.

Mr Ishikawa was referring to the broad uncertainty stemming from US President Donald Trump's trade and economic policies, as well as geopolitical posturing in the Middle East and elsewhere. The US-China tariff standoff has heightened volatility in financial markets over the past month.

The yen showed little response to the US-Japan summit, at which Mr Trump and Japanese Prime Minister Shinzo Abe agreed to intensify trade consultations between the two longtime allies.

The euro inched up 0.05 per cent to US$1.2381 after eking out small gains the previous day.

Turkey's lira stood tall after rallying more than 2 per cent against the US dollar overnight after the country's president Tayip Erdogan called snap elections for June 24.

The lira was supported as Erdogan's call for early elections was seen as the government's recognition for the need for tighter monetary policy to combat inflation.

The lira last stood at 4.019 against the US dollar.

REUTERS