Spiking yields a steady dollar after a post-Fed wobble

LONDON (Reuters) – U.S. spiking bond yields lifted the dollar on Thursday, helping it to recover from two-week levels, after the Federal Reserve pushed back against speculation about a rise in interest rates.

The 10-year U.S. Treasury yield rose to its highest levels in 13 months early in London trade, climbing above 1.70% for the first time since January 24, 2020.

The dollar index, which measures it against a basket of peers, rose as much as 0.4% to 91.761, off a two-week low of 91.300 hit after Wednesday’s Fed meeting.

Fed Chairman Jerome Powell denounced profitability that the stronger economic outlook could force the central bank to push back its stimulus.

The Fed will see the U.S. economy grow 6.5% this year, which would be the biggest annual jump in gross domestic product since 1984. Inflation is expected to exceed the Fed’s 2% target to 2.4 % this year, although officials expect it to move back to around 2% in later years.

“The question remains as to whether the Fed can seize the latest spike in U.S. Treasury product yields, especially since the development of U.S. fundamentals will continue,” said Valentin Marinov, head of G10 FX review at Credit Agricole in London. “The renewed spike in UST yields should continue to support the dollar against low yields such as the euro, yen and Swiss francs. ”

Marinov said the Fed meeting had disappointed dollar bulls and that the currency may be “nurturing its wounds against risk-related money and money in the short term”.

The euro fell to $ 1.19405, off a week high of $ 1.19900 after a 0.6% rally on Wednesday.

Norway ‘s crown reached its strongest level against the euro in 13 months – 10.0240 crowns per euro – after the country’ s central bank left rates unchanged, although it moved the lead forward to show that rate hikes could continue in the second half of this year amid signs of economic recovery.

“An announcement at the end of the 2021 rate has been delivered (and is now in the price), but we are seeing risks dragged into an earlier and faster tightening cycle (ie possibly delivering two walks this year , with the first coming at the end of Q3), ”ING developed markets economist James Smith and EMEA FX chief and IR strategist Petr Krpata said in a research note.

This marks the prospect of NOK (Norwegian crown) in general across the board, and also against its regional counterparts SEK (Swedish krona), where the Riksbank is unlikely to walking flat rates this year or next. “

Against the yen, the dollar gained 0.2% to 109.050 yen.

A report from Nikkei said that the Bank of Japan (BOJ) was expected to extend a slight bond in which it will allow long-term interest rates to move around their 0% target.

A Reuters poll this month found that two-thirds of Japanese companies had expected the BOJ to block long-term interest rate hikes and keep them stable ahead of its review this week. on how to make their incentive policy more sustainable.

The British pound fell 0.2% to $ 1.3937., After the Bank of England changed its stimulus program unchanged on Thursday. The BoE maintained its benchmark interest rate at a low of 0.1%, according to predictions in a Reuters poll of economists.

The Australian dollar rose to a two-week high of $ 0.7849 before cutting some gains. His colleague in New Zealand lost momentum after the country posted a dramatic decline in GDP in the last quarter of last year.

The kiwi was last trading at $ 0.7222.

Bitcoin held steady at $ 58,092.28, after kicking from Tuesday’s week low of $ 53,221.