FOREX-Dollar supported by high yields ahead of Fed meeting

Band Tom Westbrook

SYDNEY, January 19 (Reuters)The dollar remained firm on Wednesday after a surge in US yields the day before led to strong gains against the euro and put the greenback above support levels established in recent months amid rising expectations. increases in US interest rates.

euro EUR=EBS is back on its 50-day moving average at $1.1327 after falling around 0.7% on Tuesday, its biggest daily decline in a month.

The greenback also held the British pound GBP=D3 below its 200-day moving average ahead of UK inflation figures due later on Wednesday, as talk of a leadership challenge for Prime Minister Boris Johnson added uncertainty.

Britain’s annual headline inflation is set to hit a nearly decade-long high of 5.2% and a surprise could trigger fresh bets on Bank of England rate hikes and reignite the pound’s rally.

The dollar was boosted by rising US Treasury yields ahead of next week’s Federal Reserve policy meeting where traders are beginning to fear another hawkish surprise.

“Many (Fed) officials left us with hawkish impressions just before they went silent (before the meeting),” NatWest market strategist Jan Nevrusi said.

“After (Tuesday’s) price action, there’s a bit more of an upside forecast for the March meeting, and for next week, I imagine it’s hovering in the lower end of the range of 25 to 50 basis points.”

Two-year Treasury yields US2YT=RR jumped 15 basis points in two sessions to cross 1% and benchmark 10-year yields US10YT=RR edged higher on Wednesday to hit a new two-year high of 1.9%. WE/

Fed Funds Futures 0#FF: forecast three more hikes in 2022. Analysts say dollar strength could continue if traders start expecting rates to rise not just faster, but further.

“We expect the U.S. rate recast – and this latest rise in yields to reflect an upward push in the implied terminal rate, rather than just a faster rate of increase initially – to support the dollar at first. half of the year,” Societe Generale said. said strategist Kit Juckes.

Movements in the US bond market unsettled equity investors, providing support for the safe-haven yen on Wednesday JPY=EBS, which was at 114.41 to the dollar, slightly firmer on the day.

The overall result was that the US dollar index = USD held on most of its 0.5% gain on Tuesday, to trade at 95.676.

Traders also kept a wary eye on a delicate situation in Ukraine. US Secretary of State Antony Blinken will seek to defuse a crisis with Moscow when he meets Russia’s foreign minister in Geneva this week.

The Australian dollar AUD=D3 was at $0.7192, still struggling to break through resistance just below 73 cents. The kiwi USD=D3 was pinned at $0.6787.

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Bid rates for currencies at 04:44 GMT

The description

RIC

Last

Closing of the previous session

Percentage change

Percentage change since the beginning of the year

High bid

Low bid

euro dollar

EUR=EBS

$1.1330

$1.1327

+0.03%

-0.34%

+1.1331

+1.1319

dollar/yen

JPY=EBS

114.4300

114.5800

+0.10%

-0.28%

+114.7800

+114.6000

Euro/Yen

EURJPY=EBS

129.66

129.79

-0.10%

-0.51%

+129.9800

+129.6200

Dollar/Swiss

CHF=EBS

0.9162

0.9175

-0.09%

+0.50%

+0.9177

+0.9165

British pound/dollar

GBP=D3

1.3608

1.3598

+0.09%

+0.64%

+1.3609

+1.3590

Canadian dollar

CAD=D3

1.2490

1.2513

-0.17%

-1.21%

+1.2512

+1.2487

Australian/Dollar

AUD=D3

0.7192

0.7186

+0.08%

-1.06%

+0.7195

+0.7177

New Zealand Dollar/Dollar

USD=D3

0.6788

0.6765

+0.25%

-0.91%

+0.6790

+0.6764

All spots FX=

Tokyo spots AFX=

Spots of Europe EFX=

Volatilities FXVOL=

BOJ Tokyo Forex Market Information TKYFX

World exchange rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Tom Westbrook; additional reporting by Alun John, editing by Himani Sarkar and Simon Cameron-Moore)

((tom.westbrook@tr.com; +65 6973 8284;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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