FOREX-Higher US Yields Compress Yen; Macron’s presidential election helps the euro
Band Tom Westbrook
SINGAPORE, April 11 (Reuters) – The dollar held firm in Monday’s Asian session, helped by the inexorable rise in US yields, although the euro resisted relief that the far right did not win the first round of the French presidential elections.
The Japanese yen JPY=EBS suffered the most selling, briefly touching as low as 125 to the dollar and last sitting 0.5% lower at 124.86. Investors saw little reason to abandon bets against the yen as the Bank of Japan holds yields near zero.
Treasury yields, on the other hand, are on the rise. The 10-year benchmark yield US10YT=RR added an additional seven basis points to 2.77% on Monday as the Federal Reserve prepares to cut assets and hike interest rates sharply.
“There’s nothing there to scare people off on dollar/yen positions,” National Australia Bank foreign exchange chief Ray Attrill said. “So more and more for the dollar/yen.”
Nervousness over the economic fallout from China’s deepening COVID-19 lockdowns also spilled over into markets on Monday as commodity prices and commodity currencies fell along with Chinese stocks. MKTS/GLOB
Ten-year Treasury yields rose above their Chinese counterpart for the first time in twelve years and the yuan CNY=CFXS 0.1% less.
The Australian and New Zealand dollars each fell 0.3%. EUR/
euro EUR=EBS was a remarkable gainer and hit $1.0955 in early trading before settling about 0.1% higher than Friday’s close at $1.0883. After crossing the 100 mark on Friday, the US dollar index =USD sitting at 99.923.
With 96% of the votes counted in the first round of the French presidential election, incumbent President Emmanuel Macron garnered 27.41% and his far-right challenger Marine Le Pen followed with 24.03%, staging a second round on April 24.
A victory for Le Pen could send shockwaves through France and Europe in a similar way to Britain’s 2016 vote to leave the European Union, and relief at the first-round result spread quickly. been capped.
“It’s uneven support,” Westpac strategist Imre Speizer said as investors also braced for a European Central Bank (ECB) meeting on Thursday.
The ECB weighed rising consumer prices against the pressure on growth from the war in Ukraine. It should give more details on a gradual reduction in asset purchases, but may not give explicit hints on increases.
A U.S. consumer price report, due on Tuesday, is expected to show annual inflation at 8.5%, increasing pressure on the Federal Reserve to act urgently.
Central bank meetings are also scheduled in Canada and New Zealand on Wednesday and interest rate swap prices indicate traders see more than a 90% chance that each will raise rates by 50 basis points. BOCWATCH, RBNZWATCH
This could leave both currencies vulnerable if a lower rate hike is realized.
The New Zealand dollar USD=D3 was around 0.3% lower at $0.6831, while the Canadian dollar CAD=D3 fell by about the same margin to C$1.2605 per greenback.
Elsewhere, the Australian dollar AUD=D3 fell along with iron ore prices and hit a three-week low of $0.7418. Sterling GBP=D3 slid $0.15 to $1.3015.
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(Reporting by Tom Westbrook; Editing by Sam Holmes and Kenneth Maxwell)
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