The U.S. dollar will rise after Fed picks up a bank bailout

NEW YORK (Reuters) – The dollar rallied against major currencies on Friday, hitting a week-long high, after the Federal Reserve approved a pandemic breach of capital requirements, pushing Department yields U.S. finances off their lowest levels of the day. .

PHOTO FILE: U.S. banknotes can be seen in this photo taken February 8, 2021. REUTERS / Dado Ruvic / Photo

The greenback in recent weeks has risen in line with higher Treasury yields. Since early January, the dollar index, a measure of its value against six major currencies, has gained around 3.3%, with a 10-year U.S. benchmark note hovering around 80 basis points over the same period .

The Fed announced Friday that it would end March 31 a temporary rule directing larger banks to hold more capital against their assets, such as Finance.

The Fed had enforced the rule to encourage bank lending because American homes and businesses were hurt by locksmiths.

The dollar index last rose 0.1% on the day at 91.906. It had fallen abruptly after the Fed’s announcement of its loose policy stance on Wednesday.

Over the week, the dollar climbed 0.6%, posting gains in the last three of four weeks.

“News that the U.S. Treasury’s SLR release has not been extended has given some support to the dollar, again largely due to the increase in U.S. Treasury yield,” ING said in a research note.

“The somewhat chaotic rise in U.S. Treasury yields at some points this year has certainly weakened a market that tends to buy active currencies at dips. SLR News certainly adds an element of warning here. ”

U.S. 10-year yields rose Friday after Fed’s decision on the leverage rule, but it slipped in the afternoon to 1.726%. It hit a year-over-year peak of 1.754% in the previous session.

The Fed promised this week to go ahead with an aggressive monetary stimulus, saying a near-term inflation spike would confirm provisional forecasts for the strongest U.S. economic growth in nearly 40 years.

“I see the dollar a little stronger today but not outside the realms of late,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The fundamental macro force remains divisive. One cannot keep up with the aggression of U.S. monetary and fiscal policy. “

The euro fell 0.1% to $ 1.1908, bringing up early gains against the dollar on concerns about more coronavirus locks in Europe. France suspended a new four-week standoff from Friday in 16 regions hit hard by the health crisis.

The yen was relatively flat at 108.89 per dollar after the Bank of Japan expanded its target band for benchmark yield, a decision that was in line with market expectations.

The Japanese currency rose 0.4% against green for the week, its best weekly show since mid-February.

In the cryptocurrency market, bitcoin was trading 2% higher at around $ 58,804, after a slight downtick of $ 60,000 again the previous day.

Reporting with Gertrude Chavez-Dreyfuss and Jessica DiNapoli; Edited by Marguerita Choy and Richard Chang