US dollar strengthens amid higher US yields on Fed's lower-for-longer mantra

[TOKYO] The safe-haven US dollar strengthened again on Friday, supported by higher Treasury yields and falling stock markets, as investors continued to digest the Federal Reserve's pushback against expectations of any early interest-rate hikes.

The dollar index added 0.1 per cent, extending a 0.5 per cent jump from Thursday that was the most in two weeks.

The benchmark US 10-year yield climbed to a more than one-year peak of 1.754 per cent overnight before easing to 1.715 per cent, while Asian stocks followed Wall Street lower.

The Federal Open Market Committee (FOMC) pledged this week to press on with aggressive monetary stimulus, saying a near-term spike in inflation would prove temporary amid their projections for the strongest US economic growth in nearly 40 years.

The next focus for the currency market will be the Bank of Japan's policy decision Friday, accompanied by results of a comprehensive policy review.

"After some navel gazing," bond investors "concluded that the Fed is not (posing) any challenges or discomfort for longer-dated UST yields to keep pushing higher," National Australia Bank's senior FX strategist Rodrigo Catril wrote in a client note.

"The USD regained its mojo." The greenback gained 0.1 per cent to 109.04 yen, adding to small gains overnight.

The yen got some support from a Nikkei report on Thursday that the BOJ was expected to slightly widen an implicit band in which it allows long-term interest rates to move around its 0 per cent target.

The euro slipped 0.1 per cent to US$1.1908, extending Thursday's 0.5 per cent tumble.

While AstraZeneca vaccinations are poised to restart in Germany, France and other European nations, the region's growth outlook was dinged as Paris went into a month-long lockdown.

The British pound sank 0.2 per cent to US$1.3903 after weakening 0.3 per cent a day earlier, as the Bank of England warned the outlook for Britain's recovery remained unclear, dampening some speculation the bank would signal a more confident outlook.

In the cryptocurrency market, bitcoin weakened to around US$56,703 in early Asian trading, seesawing after breifly topping US$60,000 again overnight.

It had surged to a fresh record high of US$61,781.83 on Saturday, after more than doubling since the start of the year.

"Bitcoin is a momentum trade and it feels like it could go a lot further," said Edward Moya, a New York-based senior market analyst at online FX broker Oanda.

"Is it a bubble? Yes. But it can easily go to US$100,000 before it comes crashing down."

REUTERS