Dollar at 6-day high after US yields jump; yen steadies

London

THE US dollar hit a 6-day high in early trading on Tuesday (Jan 19) following a jump in US Treasury yields, while the yen steadied after the Bank of Japan (BOJ) saying it would stick to its ultra-loose monetary policy caused the currency to slip versus the dollar.

The US Federal Reserve meets next week. It is expected to raise rates in March, for the first time since the start of the coronavirus pandemic, and investors are pricing in 4 rate hikes in all during 2022.

As investors prepared for the possibility of the Fed being more hawkish than expected, Treasury yields jumped, with 2-year yields - which track short-term rate expectations - crossing 1 per cent for the first time since February 2020. The US 10-year yield also hit a 2-year high.

The dollar strengthened against a basket of currencies, hitting a 6-day high of 95.454 during Asian trading. At 1232 GMT it was at 95.385, up 0.2 per cent on the day.

Euro-dollar was down 0.1 per cent at US$1.1388.

German investor sentiment hit its highest in 6 months in January on expectations the incidence of Covid-19 cases will fall by early summer, allowing growth in Europe's largest economy to pick up, the Zew survey showed.

As oil prices hit a 7-year high and global equity markets slumped, Germany's benchmark 10-year government bond yield came close to, but did not exceed, 0 per cent.

The yen slipped after the BOJ said it would maintain its ultra-loose monetary policy even as its global counterparts move towards exiting crisis-mode policies.

At 1237 GMT, the dollar was flat against the yen at 114.6, with the pair having reached as high as 115.06 overnight.

The Australian dollar fell, down 0.3 per cent on the day at US$0.71875. The New Zealand dollar was also down 0.3 per cent.

The British pound was down 0.4 per cent at US$1.3596.

China's central bank plans to do more to support growth, while steadily lowering financing costs and keeping the yuan exchange rate stable, the bank's vice-governor said. The yuan hit its highest in more than 3 years, helped by trade settlement inflows. REUTERS