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Dollar Up, Boosted by Rising U.S. Yields

Forex Jun 02, 2022 01:04AM ET
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By Gina Lee

Investing.com – The dollar was up on Thursday morning in Asia, hitting a three-week high against the yen in early Asian trading. The U.S. currency held firm and was supported by rising U.S. Treasury yields, which hit two-week peaks overnight.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.04% to 102.34 by 12:57 PM ET (4:57 AM GMT).

The USD/JPY pair inched down 0.06% to 130.04.

The AUD/USD pair edged down 0.15% to 0.7164 and the NZD/USD pair inched down 0.04% to 0.6480.

The USD/CNY pair edged up 0.19% to 6.6989 and the GBP/USD pair inched up 0.04% to 1.2487.

The dollar climbed as far as 130.23 yen, its highest since May 11 and extending Wednesday's 1.1% gain. It was also heading back towards the 20-year peak of 131.34 hit in May.

The euro traded at $1.0654 after falling 0.81% to a 10-day low overnight.

"If you look at the equity market, at bonds, at dollars, it all sort of joins up," National Australia Bank head of foreign exchange strategy Ray Attrill told Reuters.

"In the last 48 hours or so we've seen a reversal in declines in U.S. Treasury yields, the 10 year is now back near 3%, equity markets have been struggling and the U.S. dollar strengthening. It's almost a mirror image of what we saw last week, when there was talk of a possible pause in the tightening cycle."

"Also I think the euro has pretty much done what it can do on the upside ahead of the ECB meeting next week, because a lot is priced in now," Attrill added.

The U.S. benchmark 10-year yield hit a two-week high of 2.951% on Wednesday, with data showing U.S. manufacturing activity picked up in May 2022 as demand for goods remained strong. The manufacturing purchasing managers’ index (PMI) at 57 and the ISM manufacturing PMI was 56.1.

U.S. job openings also remained at high levels, with the Institute of Supply Management (ISM) manufacturing employment index at 49.6 and the JOLTs jobs opening index at 11.4 million.

Yields have been on an upward trend as the U.S. Federal Reserve has hiked interest rates quickly in an attempt to curb inflation and avoid an economic recession.

The 10-year yield was a touch softer in early Asia at 2.9145%.

Investors are also awaiting Friday's U.S. jobs report, including non-farm payrolls. The European Central Bank will have its policy meeting in the following week, where it is expected to give more details about its plans for interest rate hikes.

In Asia-Pacific, the Australian dollar was little changed. In cryptocurrencies, bitcoin was trading around the $29,800 mark after falling overnight, unable to sustain its climb above the $30,000 mark earlier in the week.

Dollar Up, Boosted by Rising U.S. Yields
 

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