The dollar plunges as treasury yields are low

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NEW YORK (Reuters) – The dollar fell slightly on Monday as Treasury yields were moribund and investors eagerly awaited European and US central bank meetings.

FILE PHOTO: Four thousand US dollars are counted by a banker counting change at a bank in Westminster, Colorado, November 3, 2009. REUTERS / Rick Wilking / File Photo

Friday’s US jobs data put pressure on the dollar as investors bet job growth was not strong enough to raise expectations for the US Federal Reserve to tighten policy monetary.

This movement continued on Monday, with Treasury yields remaining subdued after Friday’s drop, reducing demand for the US dollar.

“T-bill yields edged up during the session, but remained well below levels seen before the jobs report. It was probably the engine behind the weakness of the US dollar on Monday, ”said Ronald Simpson, managing director of global currency analysis at Action Economics.

The dollar index lost 0.21% to 89.946 while the euro gained 0.23% to $ 1.2194. The dollar also lost 0.23% to 109.26 Japanese yen.

Benchmark 10-year Treasury yields were at 1.569% for the last time. They fell to 1.560% from 1.628% on Friday.

“At this point, it looks like the market really wants to run out of dollars. For us, this suggests that there is a risk involved in this move. It’s a crowded post. You already have a significant portion of the market which is net short in US dollars, so if we think we need a dismantling of those positions, ”said Bipan Rai, head of foreign exchange strategy for North America at CIBC Capital Markets.

While Rai said there was “some risk of the dollar recovering,” he noted that investors were awaiting the Federal Reserve meeting next week.

Market participants will also look at US inflation data and the European Central Bank meeting, both on Thursday.

The conciliatory rhetoric from ECB policymakers suggests the bank is in no rush to slow the pace of purchases under the € 1.85 trillion Pandemic Emergency Purchase Program (PEPP) ( $ 2.24 trillion).

Speculators have reduced their net dollar short positions over the past week, according to Reuters calculations and US Commodity Futures Trading Commission data released on Friday.

Currency investors appeared to ignore the news that the United States, Britain and other wealthy countries reached a deal on Saturday to withdraw more money from multinational companies such as Amazon and Google and reduce their incentive to shift their profits to low-tax offshore havens.

“They were expected to come to some sort of deal,” said CIBC’s Rai, but said investors were probably reluctant to make bets because “the road is long and involves many risks.” .

The Australian dollar, which is seen as an indicator of risk appetite, rose 0.22% against the US dollar to 0.776.

In cryptocurrencies, bitcoin fell 0.83% to $ 35,507, while ether fell 0.61% to $ 2,693.

Chart: USD –

Reporting by Sinead Carew and Karen Brettell, editing by Angus MacSwan



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