LONDON, Jan 20 — The dollar dipped today as this week’s rally in US Treasury yields paused, while the Canadian and Australian dollars gained on the back of rising commodity prices and optimism about economic growth.
The euro and sterling rose after suffering their worst days in a month on Tuesday when the dollar was lifted by a jump in US Treasury yields.
However, by 1100 GMT the initial gains had fizzled with investors cautious about the next move in government bond yields.
The European single currency was last at US$1.1346 (RM4.75), up slightly on the day and below an earlier high of US$1.1369.
The pound was 0.1 per cent higher at US$1.3622 and the yen was up marginally 114.26 per dollar.
This left the dollar index, which measures the greenback against six major peers, at 95.563, 0.1 per cent lower on the session.
The dollar has not performed as well as expected recently, despite a dramatic rise in expectations for the US Federal Reserve to begin hiking interest rates as early as March to curb soaring inflation.
US benchmark 10-year note yields were at 1.8379 per cent, off their two-year high of 1.902 per cent reached yesterday.
The gains come as traders prepare for the United States to tighten monetary policy at a faster pace than previously thought. Fed funds futures have fully priced in a rate hike in March and four in all for 2022.
Elsewhere a combination of higher commodity prices and expectations for tighter policy supported the Aussie and the Loonie.
The Aussie firmed 0.4 per cent to US$0.7237, extending advances from the previous day, and the Canadian dollar was heading back towards the 10-week high it touched yesterday, with one US dollar worth CUS$1.2493.
Analysts said a strong Australian labour market reading overnight also helped the Aussie.
“The latest Australian employment report...reinforced expectations that the RBA (Reserve Bank of Australia) will decide to bring an immediate end to the QE (quantitative easing) programme at their next policy meeting on 1st February,” said MUFG analyst Lee Hardman.
Hardman noted that the Canadian dollar has been the best performing G10 currency in 2022, attributing that to a sharp rebound in oil prices — which have hit seven-year highs — and speculation the Bank of Canada will soon start to hike rates.
The Norwegian crown, another currency linked to the price of oil, fell after the central bank voted to keep interest rates on hold at 0.5 per cent and said it was on track for a March hike. That disappointed some traders betting it would flag a faster rate of tightening.
The crown was last down 0.2 per cent against both the euro and the dollar. — Reuters