Dollar to yen highest in a year on recovery bets


THE US dollar hit a one-year high versus the yen and multi-month peaks with other currencies on Wednesday as investors bet that fiscal stimulus and aggressive vaccinations will help the United States lead a global pandemic recovery.

The US dollar index rose as far as 93.439, the highest in almost five months. It has climbed from close to 90 at the start of March, on course for its best month since 2016.

The US dollar set a one-year top of 110.97 yen and marked an almost five-month high of US$1.1705 per euro, although it gave up some of those gains in European trading.

The euro traded 0.1 per cent higher at US$1.1730, just off a five-month low against the greenback.

The US dollar was also supported by a surge in US bond yields, which make the currency more attractive as an investment. The yield on the benchmark 10-year Treasury note jumped to a one-year high of 1.776 per cent on Tuesday.

"With US Treasuries meaningfully under pressure yesterday, the environment is clearly supportive for the US dollar, particularly as Europe continues to battle with a third Covid wave," said ING's global head of markets, Chris Turner, in a note to clients. "Still, Europe should see an economic rebound in late Q2 as the vaccination process gathers pace and US Treasury moves should become less erratic (versus the scale of the move in February, particularly when the infrastructure spending is expected to be accompanied by US$1.8 trillion worth of tax hikes - as per media reports yesterday)."

Investors will watch closely monthly US non-farm payrolls data on Friday, with Federal Reserve policymakers so far citing slack in the jobs market for their continued lower-for-longer stance on interest rates, which has boosted the growth outlook but also stoked worries about inflation.

Data overnight showed US consumer confidence soared last month to the highest since the start of the pandemic, supporting views that economic growth will accelerate in the coming months, driven by more fiscal stimulus and an improving public health situation.

Australia's dollar edged up to US$0.7614, consolidating after its drop to US$0.7564 last week, the lowest level seen this year. The Chinese yuan traded around 6.57 per US dollar in the offshore market, from the weakest since November at 6.5838, touched on both Monday and Tuesday. REUTERS

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