Dollar rises on rising Treasury yields, upbeat economic data

by Jonathan Adams
Dollar rises

The dollar index recovered from 90.117 to stand 0.26% higher at 90.943

The dollar advanced on Wednesday as rising Treasury yields and upbeat economic data helped the greenback gain ground against other currencies.

Bitcoin hit a record high of $51,721, after crossing the $50,000 level for the first time the day before. That brought the crypto currency’s total market capitalization to more than $900 billion, as traders bet on its further acceptance among major companies.

U.S. retail sales and producer prices figures went past analyst estimates, indicating a stronger-than-expected economic recovery from the Covid-induced recession as vaccine deployment gains momentum.

We had a rather strong retail sales data and PPI is firming up, providing another round of economic data that supports the belief that the reflation trade is not going away and that inflation is approaching us, said Edward Moya, senior market analyst at OANDA in New York.

Rising U.S. bond yields also boosted the dollar, with the 10-year yield adding 1.333% from around 1.20% at the end of last week.

The dollar in the short term is going to benefit from yields, Moya said. He added that long-term, we’re talking about a weaker dollar, but in the short term we could see further strength as yields remain elevated. Everyone is going to want to ride this trade until we hear from (U.S. Federal Reserve Chairman Jerome) Powell next week.

The dollar index, which is a measure of the greenback’s strength against six other major currencies, recovered from Tuesday’s three-week low of 90.117 to stand 0.26% higher at 90.943.

The yen reacted the most with the dollar, climbing to 106.21 yen in Asian trade, its highest level since September, before reverting to 105.90.

The euro dropped 0.5% to $1.20. Risk-sensitive currencies were underpinned by the positive mood on the economic outlook.

The British pound lost 0.3% to $1.39, after reaching its highest level since April 2018 on Tuesday.

The Australian dollar declined 0.19% to $0.77.

This article is for information purposes only.
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