Dollar Slips But Remains Near 11-Month High Amid U.S. Bond Yield Boost
The U.S. dollar dipped on Wednesday, but did not stray too far away from recent gains, as a spike in American bond yields offered support to the greenback.
At 06:49 ET (10:49 GMT), the dollar index, which tracks the currency against a basket of its peers, was down by 0.2% at 106.80. But it remained near an 11-month high of 107.34 touched in the prior session.
Bond yield surge bolsters dollar
A surprise uptick in August job openings on Tuesday, often seen as a proxy for labor demand, dented an emerging narrative that the labor market in the world’s largest economy was cooling — a trend that could ease upward pressure on wages.
Concerns that a resilient job market could strengthen the case for Federal Reserve policymakers to keep interest rates higher for a longer period of time sent 10-year and 30-year U.S. Treasury yields soaring to levels last seen since 2007.
The sharp jump in bond yields, which typically move inversely to prices, boosted the dollar.
Yen under pressure
The yen hovered under the closely-watched 150 per dollar mark, after a short-lived leap in the previous session sparked speculation that authorities in Japan may have stepped in to limit a slide in the currency.
Following its first depreciation under the 150 per dollar level for the first time in nearly a year on Tuesday, the yen temporarily surged up to ¥147.3. Japanese finance minister Shunichi Suzuki refused to comment on whether Tokyo had moved to shore up the yen in the exchange rate market overnight, saying only that “we’re ready to take necessary action against excess volatility.”
Japanese authorities intervened to prop up the currency last year, the first such occurrence since 1998. The yen has fallen by about 14% against the dollar so far this year, as the Bank of Japan maintained its ultra-loose policy while the Fed hiked rates aggressively.
Elsewhere, the euro climbed versus the dollar, although it was still not too far away from its Tuesday low of $1.0448 — the weakest level since December. Sterling also gained, moving up from an almost seven-month trough of $1.2053 in the prior session.
The New Zealand dollar, meanwhile, fell slightly following a decision by the country’s central bank to keep its cash rate unchanged at 5.5%, with policymakers arguing that they were increasingly confident that past borrowing cost increases are starting to contribute to a slowing in inflation. The kiwi dropped to an almost one month-low of $0.5871.