US dollar hits four-week low as yields pull back

London

THE US dollar sank to a four-week low against other major currencies on Thursday as Treasury yields pulled back from last month's surge, with investors increasingly convinced the Federal Reserve will keep interest rates low for some time.

The Russian rouble sank more than 1 per cent to 76.65 per dollar on reports the United States will announce sanctions on Russia as soon as Thursday for alleged election interference and malicious cyber activity.

The dollar index, which tracks it against six other currencies, dipped to its lowest since March 18 at 91.535 in the European session before recovering to be basically flat at 91.590.

The euro rose as high as a four-week top of US$1.1990, matching the highest level since March 4, before trading little changed at US$1.19735.

The dollar changed hands at 108.87 yen, after hitting a three-week low of 108.755 on April 14.

Ten-year US bond yields eased to 1.6165 per cent in European trade, down from a 14-month peak of 1.776 per cent reached in late March, reducing the dollar's yield attraction.

"The UST yields, while elevated historically, have been caught in a tight range in recent weeks and thus offered little support to the USD," said Valentin Marinov, head of G10 FX research at Credit Agricole.

"This is due to the still very dovish tone of the Fed that seemed to ignore the rapidly improving outlook for the US economy."

Repeated assurances from Fed officials that they will keep interest rates low have helped stabilise US bonds, especially at the short end of the market.

Meanwhile, stocks have marched higher, with the S&P 500 setting records this week.

Fed Chair Jerome Powell said on April 14 that in time, the US central bank would reduce its monthly bond purchases before it committed to an interest rate increase, a scenario many investors had regarded as a given.

A weaker US dollar also saw commodity currencies supported. The Australian dollar rose as high as US$0.7754 on Thursday for the first time since March 23, following a 1 per cent rally the day before that saw it break out of its tight trading band over the past few weeks.

The New Zealand dollar also rose to a three-week high of US$0.7174.

"In the near-term, the US dollar investors will likely focus on the US data today and tomorrow, which should confirm that the economic outlook continues to improve," Mr Marinov said. REUTERS