Global optimism, UK spending promises lift long gilt yields to three-month high

© Reuters.  Global optimism, UK spending promises lift long gilt yields to three-month high © Reuters. Global optimism, UK spending promises lift long gilt yields to three-month high

By David Milliken

LONDON (Reuters) – British long-dated government bond yields rose to their highest in more than three months on Thursday as a global improvement in risk appetite and the prospect of big increases in public spending overshadowed a more dovish Bank of England.

Ten-year gilt yields () peaked at 0.814%, up around 9 basis points on the day and the highest since July 16, and 20- and 30-year yields gained a similar amount () ().

By contrast, two-year yields () barely budged — pinned down by an unexpected split vote at the Bank of England — and the two-year/10-year yield curve rose to its steepest since July 15 at 24 basis points.

The steepening yield curve reflected countervailing forces at play for different maturities of gilts.

Markets received a shock earlier in the day when two BoE policymakers unexpectedly voted to cut rates, and the majority said a rate cut could become necessary if Brexit uncertainty and a global slowdown did not ease.

One measure of interest rate expectations now prices in a two thirds chance of a quarter-point BoE rate cut by the end of next year, compared with just over half on Wednesday, pushing down on two-year and five-year gilt yields, which are already well below the BoE’s 0.75% Bank Rate.

But the broader tone in markets on Thursday was negative for fixed income assets, bolstered by increased optimism about a trade deal between the United States and China.

German 10-year Bunds , like their British counterparts, rose to their highest since mid-July.

And for longer-dated gilts, there was added upward pressure on yields from the second day of Britain’s election campaign, in which both the Conservative Party and the Labour opposition promised big increases in spending if they win the Dec. 12 vote.

The fiscal news was “arguably more significant” for gilts than the BoE decision, Capital Economics analyst Oliver Allan wrote in a note to clients.

Labour’s would-be finance minister, John McDonnell, promised an extra 150 billion pounds ($ 192 billion) of infrastructure spending during the next five years, on top of 250 billion pounds he has already promised for the coming decade.

McDonnell’s Conservative counterpart, Sajid Javid, said he would spend an extra 100 billion pounds.

Both plans would require a significant increase in gilt issuance over the medium term, and could push up inflation or BoE rates if the spending hits the economy at a time when it is close to full capacity.

However, Capital said it expected the increase in British yields to be limited as any significant rise would attract foreign investors at a time when yields on much euro zone debt are below zero.

“Although UK yields are low historically, they are not particularly low relative to those elsewhere in the developed world,” Allen said.

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.

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Ruble Recaptures Emerging-Market Crown With Yields Near 2013 Low

© Reuters.  Ruble Recaptures Emerging-Market Crown With Yields Near 2013 Low © Reuters. Ruble Recaptures Emerging-Market Crown With Yields Near 2013 Low

(Bloomberg) — Russia’s is once again the year’s best performer in emerging-markets and benchmark bond yields have dropped to levels not seen since before the annexation of Crimea as a dovish central bank and renewed risk appetite help extend a rally.

The ruble shrugged off sliding oil prices and headed for its best week since March, while the rate on , known as OFZs, dropped toward the lowest closing level since 2013. Central Bank Governor Elvira Nabiullina gave fresh impetus to the bond rally last week when she hinted during a rates meeting at deeper-than-expected cuts.

“The likelihood of seeing a key rate lower than 6.5% has grown since the meeting,” said Tatiana Evdokimova, an analyst at Nordea Bank in Moscow. “In the short term that will increase interest in OFZs.”

After cutting the key rate at a third consecutive meeting to 7% last week, the Bank of Russia removed mention of a 6%-7% neutral rate in its outlook, implying that there may be room to cut further. Emerging-markets assets also got a boost on Thursday when European Central Bank President Mario Draghi announced large-scale stimulus, including a bond-purchase program, and reduced its deposit rate.

Currencies in developing nations climbed for an eighth day on Friday, set for their longest stretch of gains since January 2018 on growing optimism for a resolution in the U.S.-China trade conflict.

Markets at a glance:

  • The ruble was the second-best performer among developing-nation peers on Friday, strengthening 0.8% to 64.18 against the dollar as of 2:53 p.m. in Moscow
  • The currency has handed carry traders a return of 4.2% this month
  • The yield on 10-year ruble notes was two basis points lower at 6.98%, down 14 basis points in September
  • The cost of insuring Russia’s soveriegn debt against default has tumbled to the lowest level since 2007

Inflation in Russia has plunged this year, meaning that even after three rate reductions, Russia’s real rates are still among the highest in emerging markets. They offer some of the juiciest returns globally at a time when central banks worldwide are cutting.

“With its positive real yield, negative net debt and budget surplus, the ruble looks extremely attractive as a carry trade,” Andrei Kochetkov, Otkritie Brokerage analyst, wrote in a note

From last week: Bank of Russia Signals More Easing

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.

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Dollar pressured again as economic fears linger amid declines in U.S. yields

By Shinichi Saoshiro

TOKYO (Reuters) – Pressure was back on the dollar on Wednesday, as nagging fears the Sino-U.S. trade war will drag on and severely hurt economic growth led to yet another slide in U.S. bond yields.

The against a basket of six major currencies () stood little changed at 98.013 after dipping 0.1% overnight.

The greenback started on a shaky footing this week, but then recovered as safe-haven Treasury yields bounced from multi-year lows after U.S. President Donald Trump softened his tone against China and predicted the two countries would be able to reach a trade deal.

But optimism on trade negotiations wilted as China’s foreign ministry dismissed U.S. suggestions that there had been contact between the two sides, and said it hopes Washington can stop its wrong actions and create conditions for talks.

The dollar’s peers, notably the safe-haven yen, got an additional boost as falls in long-term Treasury yields deepened the inversion of the U.S. yield curve, a phenomenon that has presaged several past U.S. recessions.

“The markets have pulled out of the latest round of chaos,” said Takuya Kanda, general manager at Gaitame.Com Research Institute, referring to the tumult in global markets at the end of last week when Washington and Beijing announced fresh tit-for-tat tariffs in a further escalation of their trade dispute.

“But as the U.S. yield curve inversion shows, the markets’ economic views remain dim, and the yen ends up gathering more buyers than sellers,” Kanda said.

The 10-year U.S. Treasury yield () extended declines from overnight and last stood at 1.461%, edging back toward 1.443%, its lowest since July 2016 brushed on Monday.

The dollar was a shade weaker at 105.680 yen after shedding 0.35 percent overnight, but still up from an eight-month low of 104.460 hit on Monday.

The euro was flat at $ 1.1091 () after inching down 0.1% on Tuesday when it had managed to recoup some of the intraday losses on hopes that a snap election in Italy could be avoided.

The pound traded near a one-month high of $ 1.2310 scaled overnight.

Sterling rallied on Tuesday after Britain’s opposition Labour Party leader Jeremy Corbyn said he would do everything necessary to prevent Britain leaving the European Union without a divorce deal.

The Australian dollar was almost flat at $ 0.6751, having lost 0.4% on Tuesday after Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said a weakening domestic currency was supporting the economy and that further falls would be beneficial.

The has fallen to a decade-low of $ 0.6677 early in August, weighed by factors including RBA’s monetary easing bias and a bleaker economic outlook in China, Australia’s largest trading partner.

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.

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Dollar nudged off three-week peak as U.S. yields dip before Jackson Hole meet

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar was on the defensive on Wednesday, elbowed off a three-week peak by a reversal in U.S. yields as they headed south again ahead of a meeting of central bankers, at which the Federal Reserve is expected to give clues on further rate cuts.

Central bankers will gather at Jackson Hole, Wyoming, on Friday with markets focused on a scheduled speech by Fed Chair Jerome Powell.

His comments will take center stage especially after last week’s inversion of the U.S. yield curve -widely regarded as a recession signal- boosted expectations for the Fed to lower interest rates at its September policy meeting. Faced with rising risks to the U.S. economy, the central bank in July cut rates for the first time since the financial crisis.

The () against a basket of six major currencies was flat at 98.210 after shedding 0.2% overnight.

The index had climbed to 98.450 on Tuesday, its highest since Aug. 1, as U.S. yields bounced back from multi-year lows at the week’s start on signs global policymakers were ready to step up stimulus support to stave off a steep economic downturn.

U.S. yields, however, declined overnight on the prospect of more easing by the Fed.

Takuya Kanda, general manager at Gaitame.Com Research Institute, believes U.S. President Donald Trump’s “strong desire for deep rate cuts” may raise hopes among some traders of strong easing signals at Jackson Hole. But he also warned that Powell may opt to give little away in his speech as the Fed prepares for the September policy review.

Investors will also be looking for clues on the Fed’s plans in minutes of its July policy meeting due later on Wednesday.

The dollar was little changed at 106.330 yen after shedding 0.4% the previous day, while the euro was steady at $ 1.1094 (), having put on 0.2% overnight.

The single currency dipped briefly after Italy’s Prime Minister Giuseppe Conte announced his resignation on Tuesday.

“Conte’s resignation won’t have a strong impact on the euro in the longer run as it is only a chapter in the ever-shifting Italian politics,” said Kanda at Gaitame.Com Research.

Sterling traded at $ 1.2162 , holding a bulk of the gains made on Tuesday when it advanced 0.4%.

The pound rose after German Chancellor Angela Merkel said the European Union would think about practical solutions regarding the post-Brexit Irish border.

The Australian dollar was largely flat at $ 0.6775 after edging up 0.2% on Tuesday.

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.

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Forexlive Americas FX news wrap: US yields recover a bit into the weekend

Forex news for NY trading on August 16, 2019

Yes this week, had a day when the Dow and Nasdaq each fell over 3%. However, this week was really about yields. 

  • The 10 year yield moved from 1.745 last Friday to a low of 1.4732 before rebounding yesterday afternoon and today and are currently trading at 1.555%.  Nevertheless, that is a 10.9% decline for the week or nearly 20 basis points.  PS at the lows, the yield reached 1.4732% or -15.56% for the week.  

Forex news for NY trading on August 16, 2019

  • The 2-10 year spread went negative for the first time since 2007 (see chart below) 
The 2-10s spread traded negative for the first time since 2007

Those were the catalysts for the tumble in stocks for the week. 

The fundamental reason for the fall?  

Despite concession by the Trump administration that some of the China tariffs would be delayed until December (and some will not take place at all), the anxiety about what can and will be done as far as “a deal” remains sketchy at best.  It is the US’s Brexit dilemma. 

This week, China’s Xi said:

  • We will retaliate if tariffs go into effect in September
  • Let’s meet half way
  • Hong Kong is none of your business.

Pres. Trump said:

  • A deal will be on US terms
  • Xi should go talk to the protesters
  • The US will win

In addition, other central banks are ready to and willing to go low(er) even if the US is reluctant.   

The EU’s Rehn said that the it is better to be safe than sorry (the chance of a 20 bp cut went up for the ECB), and the Bank of Mexico went ahead and had a surprise cut. Last week, the RBNZ cut by 50 bps instead of 25 bps.  

The global trend is for lower rates and that has the market marking down rates in the US as well.  

The European 10 year yields are all making all time lows.  Germany’s low yield today was -0.727% before rebounding, and Spain got within 0.02% of reaching 0.0% (see lows in the chart below). 

European 10 year yields rebounded after nearly dragging the Spanish yields to negative

With the US 10 year at 1.56%, it seems like a steal, especially if the fundamental backdrop for the economies of the world are unknown and loaded with increased risks. 

US yields are mixed today

Now it is not alll doom and gloom.  The data in the US this week was good enough to have the Atlanta Fed GDPNow rise from 1.9% to 2.2% and the NY Fed to rise to 1.82% from 1.58% (vs a week ago). Those are better than the German and UK GDP most recent numbers which were negative.  

The key event in the new week will be Chair Powells testimony at the annual Jackson Hole Economic Symposium  on Friday.  With Pres. Trump getting on his case big time especially as stocks fell, and the market looking for 3 more cuts in 2019, the market will be looking for a dovish Fed chair (is there any choice?)  

In summary for the forex market this week (see the 5 day ranking of the strongest and the weakest), the GBP was the the strongest of the major currencies and the EUR was the weakest (helped by the Rehn comments). The USD was mostly higher with the largest gains vs the EUR at 0.98% and the largest decline vs the GBP (-0.94%).  The EURGBP was the largest moving pair with a 1.98% move (EURGBP fell -1.98%).  

That may just be covering in the GBP. Afterall the CBOT speculative positions still has the GBP shorts as the largest position. So a short squeeze is not out a surprise.  However, the Brexit clock is still ticking and Germany today was encouraging the EU27 to stick to their guns on the current deal.   PM Johnson will be going to Europe next week to meet France’s Macron and Germany’s Merkel who may just say “sod off mate” (or the equivalent) when he comes looking for a compromise.  That may weaken the GBP again.   

The 5 day ranking of the major currencies. Wishing all a good and safe weekend.

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Falling Treasury yields pull down USD/JPY

USD/JPY at the lows of the day

The market US 10-year yield is down 3.5 basis points to 1.99%. The note has given back all of yesterday’s move and remains near cycle lows.

That’s a surprise given the good news from Trump-Xi and yesterday’s better ISM print. The market is sending some worrisome signals about the global economy.

In turn, USD/JPY has slipped to the lows of the day and is now in the gap from the open yesterday.

USD/JPY at the lows of the day

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Dollar sags as U.S. yields slide, Aussie steady after RBA cuts rates

© Reuters. Illustration photo of a U.S. Dollar note © Reuters. Illustration photo of a U.S. Dollar note

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar struggled to shake off a harsh overnight session, slipping to a five-month low against the yen on Tuesday, hurt by a sharp slide in U.S. Treasury yields thanks to rising bets for a near-term rate cut by the Federal Reserve.

The benchmark fell to its lowest level since September 2017 overnight, coming within reach of the 2% threshold after St. Louis Federal Reserve President James Bullard said a rate cut “may be warranted soon” given the rising risk to economic growth posed by global trade tensions as well as weak U.S. inflation.

Treasury yields had already been on a steep decline as investors have been piling into safe-haven government bonds in the face of escalating trade tensions between Washington and its trade partners.

The dollar traded down 0.1% at 107.980 yen after brushing 107.860, its lowest since Jan. 10.

The against a basket of six major currencies was steady at 97.153 after shedding 0.6% the previous day.

“The dollar is even falling against currencies such as the euro. Participants have found an incentive to finally cover euro shorts on the sharp fall in U.S. yields,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“The dollar has been a safe-haven during the current ‘risk off’ phase, but it’s strength is waning as the unexpected pace of the drop in U.S. yields has become too much to ignore.”

The euro nudged up 0.1% to $ 1.1251 after rallying roughly 0.7% overnight to $ 1.1262, its highest since May 13.

The single currency has drawn support from a weaker dollar but analysts remain cautious on its longer term prospects.

“Considering the euro zone’s close ties with the Chinese economy, the euro is one of the currencies that stands to be most affected by a Chinese economic downturn – a risk associated with the escalating U.S.-China trade war,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

AUSSIE STEADY AFTER RBA CUTS RATES

The Australian dollar held steady at $ 0.6974, giving up brief gains of 0.2% to a three-week peak of $ 0.6975 after the nation’s central bank cut rates in a widely anticipated move.

The Reserve Bank of Australia (RBA) cut its cash rate on Tuesday to an all-time low of 1.25% from 1.50%, but it did not give a clear indication of plans for further cuts.

The pound was flat at $ 1.2666, having crawled off a five-month trough of $ 1.2560 set on Friday thanks to the dollar’s underperformance.

Sterling had sunk to the five-month low, weighed by the prospect of Britain choosing a eurosceptic prime minister who could take a hard line on Brexit.

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.

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Dollar holds up on trade, European political worries; U.S. yields fall

© Reuters. FILE PHOTO: U.S. dollar notes are seen in front of a stock graph in this picture illustration © Reuters. FILE PHOTO: U.S. dollar notes are seen in front of a stock graph in this picture illustration

By Daniel Leussink

TOKYO (Reuters) – The dollar managed to hold on to most of its overnight gains on Wednesday after investors scooped up safe-haven assets, including U.S. Treasuries, on lingering fears of a further escalation in the Sino-U.S. trade dispute.

Losses in the euro in the previous session also helped support the dollar, as analysts warned of more risks for the single currency on uncertainty surrounding the euro zone economy and the bloc’s political future.

“It looks like there has been a real surge in U.S. Treasuries,” said Nick Twidale, chief operating officer at Rakuten Securities Australia in Sydney.

“We’re probably going to see some catch-up in the foreign exchange market over the next few sessions,” Twidale said, adding that he expected safe-haven currencies such as the Japanese yen and the Swiss franc to be in demand.

Against a basket of six peers, the dollar was down less than 0.1% at 97.897, having ended up 0.3% overnight. The index was trading about 0.5% off a two-year high of 98.371 hit on Thursday and is still up 1.8% for the year.

The dollar held mostly steady even after benchmark 10-year U.S. Treasury yields hit as low as 2.243%, their lowest since September 2017. The greenback’s own status as a safe-haven helped amid worries about the trade tensions and Italy’s budget policy. The U.S. 10-year yields were last at 2.253%.

The euro edged up 0.1% to $ 1.1167, bouncing slightly after shedding nearly 0.3% during the previous session. The common currency remained not far off a near two-year low of $ 1.11055 brushed on Thursday.

European Union leaders are set to begin the process of filling a number of top EU posts, from the head of the European Commission to the European Central Bank.

“The reason we’ve seen the euro drop off is because the European zone in particular has been threatened by and troubled by the trade concerns,” said Rakuten’s Twidale.

“On the back of that, we also had those European elections so there’s a lot of political instability in Europe,” he added. “That’s putting pressure on the currency.”

Italian Deputy Prime Minister Matteo Salvini, whose far-right League triumphed in European elections on Sunday, said the European Commission could fine Italy 3 billion euros for breaking EU debt and deficit rules, a comment that weighed on the single currency.

The yen was 0.15% stronger at 109.22 per dollar on the lower U.S. yields and after U.S. President Donald Trump said on Monday he expected Japan and the United States to announce a trade agreement “probably in August.”

The yen, which tends to draw steady support from a flight-to-safety bid during geopolitical or financial stress as Japan is the world’s biggest creditor nation, remained just 0.2% above a three-month high of 109.02 yen touched on May 13.

The Australian dollar inched up to $ 0.6929, about 0.9% off a recent trough of $ 0.6865.

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.

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Dollar hovers near three-and-a-half-week high, supported by higher U.S. yields

© Reuters. FILE PHOTO: U.S. dollar notes are seen on a desk at a currency exchange booth in Karachi © Reuters. FILE PHOTO: U.S. dollar notes are seen on a desk at a currency exchange booth in Karachi

By Daniel Leussink

TOKYO (Reuters) – The dollar hovered near a four-week high on Wednesday, supported by higher U.S. yields after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.

The move came as a relief to markets hit by escalating trade tensions between the United States and China, though analysts said sentiment remained fragile with tariff negotiations between the world’s two largest economies yet to produce a durable solution.

“The trade dispute won’t be resolved easily, so the risk-off mood won’t come off all of a sudden. I think market sentiment will rather improve one small step at a time,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

Against a basket of key rival currencies, the dollar was last a shade lower at 98.014, having brushed a 3-1/2-week high of 98.134 overnight. The index has risen 1.9% so far this year.

The U.S. Commerce Department blocked Huawei Technologies Co Ltd from buying U.S. goods last week, leading several companies to suspend business with the world’s largest telecoms equipment maker.

Chipmakers, many of which sell to Huawei, bore the brunt of the sell-off. But late on Monday, the United States granted Huawei a license to buy U.S. goods until Aug. 19.

Against the yen, the dollar was largely steady at 110.49 yen, having hit a two-week high of 110.675 during the previous session. The greenback has recovered 1.4% from a three-month trough of 109.02 yen touched on Monday last week.

Japan’s exports fell 2.4% in April from a year earlier, down for a fifth straight month, in a sign of weakness in external demand, finance ministry data showed, compared with a 1.8% decrease expected by economists in a Reuters poll.

Sumitomo Mitsui’s Sera said the yen’s weakness overnight was thanks to the higher U.S. Treasury yields, which ticked up in response to the recovery in U.S. equities.

“When yields are rising, it’s natural for the dollar to be bought. I think moves in U.S. yields are really important,” she said.

The was last largely unchanged at 2.423% after moving further off a seven-week low of 2.354% brushed on Thursday during the previous session.

The euro was steady at $ 1.1162.

The single currency, which has given up 0.9% from this month’s high touched on May 1, has been under pressure in recent weeks on dollar strength and due to concerns the upcoming European parliamentary elections may see euroskeptic parties faring well.

The pound was at $ 1.2713, hovering near a four-month low of $ 1.2685 touched overnight. It briefly rose overnight after Prime Minister Theresa May set out a “new deal” for Britain’s departure from the EU, offering sweeteners to Parliament including the chance to vote on whether to hold a second referendum to try to break the impasse over Brexit.

Yet traders doubted that a fractious Parliament would have to back any new referendum.

(Graphic: World FX rates in 2019 – http://tmsnrt.rs/2egbfVh)

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.

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Dollar near two-and-a-half-week peak on higher yields, trade tensions; Aussie slips

© Reuters. FILE PHOTO: An employee counts U.S. dollar notes in a bank in Cairo © Reuters. FILE PHOTO: An employee counts U.S. dollar notes in a bank in Cairo

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar was steady near a 2-1/2-week high on Tuesday, supported by higher U.S.-yields and its safe-haven status, with growing worries that the U.S.-China trade war could worsen following Washington’s crackdown on China’s Huawei Technologies.

The against a basket of six major currencies was a shade higher at 97.965 after brushing 98.036 overnight, its highest since May 3.

Global equities have taken a hit this week, with share prices in chipmakers falling in the wake of the U.S. moves against Huawei.

“The dollar has established itself as a safe-haven and it attracts demand in times like this, with equities falling and market volatility rising,” said Takuya Kanda, general manager at Gaitame.Com Research Institute.

“The bounce by Treasury yields is another factor supporting the dollar. The recent drop by the 10-year yield seemed overdone, and with Fed’s Powell not providing clear hints of a rate cut this year, the rebound in yields could continue for a while.”

Federal Reserve Chair Jerome Powell said on Monday that it was premature to make a judgment about the impact trade and tariff issues could have on monetary policy.

The 10-year Treasury note yield extended its overnight rebound and brushed an eight-day high of 2.428%. The yield had dropped to 2.354% last week, its lowest since March 28, after weak U.S. retail sales data increased rate cut expectations.

“Among industrialized nations, only Italy has a higher 10-year yield than the United States. Under such conditions, buyers have little choice but to turn to the dollar,” said Daisuke Karakama, chief market economist at Mizuho Bank.

The 10-year Italian government bond yielded 2.705%, driven up by domestic political uncertainty and the country’s rising debt. The 10-year German and Japanese yields stood at minus 0.088% and minus 0.05%, respectively.

The euro was flat at $ 1.1165 after slipping to $ 1.1150 the previous day, its lowest since May 3. The single currency is expected to remain on a nervous footing through the May 23-26 European parliamentary election.

The dollar was 0.15% firmer at 110.195 yen, in touching distance of a two-week high of 110.320 scaled the previous day.

AUSSIE’S ADVANCE CUT SHORT

The Australian dollar was 0.25% lower at $ 0.6891, its earlier advance fizzling out after Reserve Bank of Australia Governor Philip Lowe said on Tuesday that the central bank will consider the case for lower interest rates at its June policy meeting.

A cut would be the first since the RBA’s last easing to a record low 1.50% in August 2016.

The had gained nearly 0.6% the previous day on a surprise election win by the country’s conservative government. Investors had regarded the opposition Labor Party’s economic policies as less business-friendly, and their relief at Labor’s unexpected defeat drove a rally in Australian markets.

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