TOKYO (Reuters) - The dollar stood firm against its low-yielding peers on Tuesday on bets of a faster economic recovery and greater tolerance of higher U.S. bond yields, while the Australian dollar looked to guidance from the country’s central bank.
The dollar index last stood at 91.014, having hit a three-week high of 91.139 overnight, with its February peak of 91.600 seen as a possible next target.
The U.S. currency rose to 106.89 yen on Monday, its highest since late August, and last stood at 106.84 yen while the euro dipped to $1.2049, near its lowest level in almost two weeks.
The common currency was under pressure as top officials from the European Central Bank sounded alarm over rises in bond yields.
President Christine Lagarde said on Monday the ECB will prevent a premature increase in borrowing costs for firms and households.
Policymaker Francois Villeroy de Galhau was even more explicit, saying some of the recent rises in bond yields were unwarranted and that the ECB must push back using the flexibility embedded in its bond purchase programme.
Traders were quick to sense the marked difference in tone between the ECB and the Federal Reserve.
Richmond Federal Reserve President Thomas Barkin said on Monday the uptick in long-term bond yields so far seems to suggest an adjustment to stronger growth and inflation outlook.
Atlanta Fed President Raphael Bostic said last week that bond yields remain comparatively low, while Federal Reserve Chair Jerome Powell has also shown no undue concerns about rising bond yields.
“Central banks continue to take diverging views on the signals sent by the recent rise in yields. The U.S. Fed is taking it as a positive signal,” Tapas Strickland, director of economics and markets at National Australian Bank in Sydney, said in a note.
The U.S. economic recovery is also seen on a firmer ground, already bolstered by prospects of a $1.9 trillion relief package from the Biden Administration and successful rollouts of COVID-19 vaccinations.
A survey by the Institute for Supply Management (ISM) released on Monday showed U.S. manufacturing activity increased to a three-year high in February amid a surge in new orders.
As a result, the gap between U.S. and European bond yields has been widening in a boost to the dollar; the 10-year yield differentials between U.S. Treasuries and German Bunds reached 1.76% on Monday, the highest in a year.
Richmond Federal Reserve President Thomas Barkin said on Monday the uptick in long-term bond yields so far seems to suggest an adjustment to stronger growth and inflation outlook.
Atlanta Fed President Raphael Bostic said last week that bond yields remain comparatively low, while Federal Reserve Chair Jerome Powell has also shown no undue concerns about rising bond yields.
“Central banks continue to take diverging views on the signals sent by the recent rise in yields. The U.S. Fed is taking it as a positive signal,” Tapas Strickland, director of economics and markets at National Australian Bank in Sydney, said in a note.
The U.S. economic recovery is also seen on a firmer ground, already bolstered by prospects of a $1.9 trillion relief package from the Biden Administration and successful rollouts of COVID-19 vaccinations.
A survey by the Institute for Supply Management (ISM) released on Monday showed U.S. manufacturing activity increased to a three-year high in February amid a surge in new orders.
As a result, the gap between U.S. and European bond yields has been widening in a boost to the dollar; the 10-year yield differentials between U.S. Treasuries and German Bunds reached 1.76% on Monday, the highest in a year.
Source Reuters