US dollar at 3½-month high on firmer US yields

London

THE US dollar hit a 3½-month high on Monday as rising US Treasury yields spooked investors and boosted the greenback's safe-haven appeal.

After falling 4 per cent in the last quarter of 2020, the US dollar has strengthened by nearly 2.5 per cent year to date.

This is as investors expect the broad rise in US bond yields to weigh on stretched equity valuations and boost demand for the US currency.

Recent economic figures are also supportive with US data showing that non-farm payrolls surged by 379,000 jobs last month, while the US Senate approved President Joe Biden's US$1.9 trillion recovery package.

"The US labour market is healing quickly, President Biden's gargantuan relief package has been approved by the Senate, and America has stepped up its immunisation game, administering a record number of vaccines this weekend," said Marios Hadjikyriacos, an investment analyst at XM.

But while US yields climbed within striking distance of a one-year high above the 1.62 per cent hit on Friday, German yields dipped nearly five basis points last week, pulling the euro to a near four-month low below US$1.19.

Bank of America (BofA) analyst Athanasios Vamvakidis said that the potent mix of US stimulus, faster reopenings as well as greater consumer firepower was a clear positive for the US dollar.

The US dollar index stood at 92.30 against a basket of six major currencies, up 0.4 per cent - its highest level since late November.

Meanwhile, the Australian dollar weakened 0.3 per cent to US$0.7658.

The New Zealand dollar was down about 0.8 per cent.

The currencies have been in demand because of their links to global commodities trading, but the US dollar's bounce dented both.

The US dollar held near a one-month high against the British pound, at US$1.3819.

Against the low-yielding Japanese yen, the greenback held firmer at 108.56 yen, having hit a nine-month high of 108.645 on Friday. REUTERS