Dollar firms as inflation, rate hike expectations push up bond yields

0
30
imageEconomy1 hour ago (Oct 18, 2021 15:10)

© Reuters. FILE PHOTO: U.S. dollar banknote is seen in this picture illustration taken May 3, 2018. REUTERS/Dado Ruvic/File Photo

By Karen Brettell

NEW YORK (Reuters) – The dollar gained slightly on the day on Monday as Treasury yields rose on expectations the Federal Reserve will need to hike interest rates sooner than previously expected to quell rising price pressures.

Market participants expect the U.S. central bank will need to act as inflation looks to be stubbornly persistent and unlikely to fade anytime soon.

Global increases in inflation are also increasing expectations that rate hikes will need to be global, as New Zealand faced its highest price pressures in a decade and after Bank of England Governor Andrew Bailey sent a fresh signal that the central bank was gearing up to raise interest rates as inflation risks mount.

“Global bond markets are finally waking up to the risks that inflation isn’t as transitory as most central banks insist,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a report.

The dollar index gained 0.03% against a basket of currencies to 93.99, after earlier rising to 94.17.

The euro rose 0.03% to $1.1601, after earlier dropping to $1.1570. It has fallen 5% this year.

Sterling hit a 20-month high against the euro of 0.8427, before rebounding to 0.8451.

The kiwi hit a one-month high of $0.7105 against the greenback, before retracing to $0.7071.

Analysts at Bank of America (NYSE:BAC) noted on Monday that commodity-linked currencies, including the Norwegian krone and the Canadian and Australian dollars, had been the best performers since the summer as energy prices rise, while the euro and the yen had been the worst.

The yen was close to a new three-year low, with the dollar last up 0.06% at 114.28 yen, close to Friday’s 114.46 level that was last hit in October 2018.

Dollar firms as inflation, rate hike expectations push up bond yields

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

LEAVE A REPLY

Please enter your comment!
Please enter your name here