Dollar bides time, looks to Powell for inspiration

The dollar rose to 107.09 yen, the highest since July last year

  
The U.S. dollar sign is seen on an electronic board next to a traffic light in Moscow, Russia August 10, 2018.

The U.S. dollar sign is seen on an electronic board next to a traffic light in Moscow, Russia August 10, 2018.

REUTERS/Maxim Shemetov

TOKYO  - The dollar hit a seven-month high against the yen on Thursday as an orderly rise in U.S. Treasury yields lent support ahead of a speech by Federal Reserve Chairman Jerome Powell that may determine the trend for global bond markets and currencies.

The dollar also traded near a three-month high against the Swiss franc and held on to gains against most currencies as a renewed sense of calm in the Treasury market supported sentiment.

However, currencies were subdued overall as traders avoided taking out big positions before the speech later in the day.

Investors are anxious to see if Powell expresses concern about a recent volatile sell-off in Treasuries and if there is any change in his assessment of the economy before the Fed's next meeting ending March 17.

The dollar may continue to rise against the yen as long as Treasury yields rise at a measured pace, but the greenback is likely to fall against currencies of major commodities exporters as more signs point to a rebound in the global economy.

"The performance of the dollar will vary depending on the currency," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"Dollar/yen looks well bid because of yields and because Japan's economy is underperforming relative to the United States, but as long as commodity prices rise, the dollar will weaken against commodity currencies."

The dollar rose to 107.09 yen, the highest since July last year.

The U.S. currency bought 0.9195 Swiss franc, close to the highest since November.

The British pound eased slightly to $1.3940, while the euro traded at $1.2060, nursing a 0.24% loss from the previous session.

The benchmark 10-year Treasury yield edged up to 1.4825% in Asian trading.

A chaotic sell-off in Treasuries from the start of the year on concerns that massive government spending to support the global economy may drive up inflation culminated in 10-year yields rising to a one-year high of 1.6140% last week. 

The move was so rapid that global stock markets fell and the dollar swooned against most currencies, but the greenback has since regained its composure as disorderly selling of Treasuries seems to have run its course, for now at least.

The dollar index stood at 91.009 against a basket of six major currencies, holding on to a 0.32% gain from Wednesday.

The Australian dollar, which is often traded as a proxy for global growth because it is closely tied to commodities, recovered from early losses and rose to $0.7788.

The New Zealand dollar, closely watched commodity currency, also firmed slightly.

Traders said the Aussie and the kiwi are likely to continue rising because both economies are rebounding strongly from the COVID-19 pandemic and they will both benefit from an acceleration in global trade.

In the cryptocurrency market, bitcoin rose 2.38% to $51,593, while rival digital currency ether added 3.31% to $1,621.

Bitcoin has surged 78% so far this year as it gains more acceptance in the financial services industry, but the U.S. financial regulator is likely to start working on guidelines for digital assets, which could increase scrutiny of cryptocurrencies.

(Reporting by Stanley White; Editing by Richard Pullin and Ana Nicolaci da Costa) ((stanley.white@tr.com; +81 (0)3 4563 2799; twitter.com/stanleywhite1 ;))

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