Dollar at 4-Week Low on Retreating Treasury Yields

Dollar
FILE PHOTO: An employee counts U.S. dollar bills at a money exchange in central Cairo, Egypt, March 20, 2019. REUTERS/Mohamed Abd El Ghany./File Photo

NEW YORK ⸺ The dollar fell to a four-week low against a basket of currencies on Friday, still smarting from a sharp drop in U.S. Treasury yields the previous session, and as investors increasingly bought into the Federal Reserve’s insistence it would keep an accommodative policy stance for a while longer.

The benchmark 10-year U.S. Treasury yield dipped to a one-month low of 1.528% overnight, moving further away from March’s 1.776%, its highest in more than a year, even in the face of Thursday’s stronger-than-expected retail sales and employment data. On Friday, the 10-year recovered some ground to trade at 1.5675%. 

“It’s a little bit of a change of course,” said Minh Trang, senior FX trader at Silicon Valley Bank.

Trang cited some profit-taking after the greenback’s sharp appreciation in March as well as the recent retreat in Treasury yields as main reasons for the dollar’s weakness.

Investors’ healthy appetite for riskier assets such as equities has also sapped some of the safe-haven demand the dollar typically enjoys, Trang said.

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Some market participants expect the dollar weakness to persist.

“My best guess is the 10-year Treasuries won’t move a great deal from here over the coming quarter and that sets the backdrop for the recent dynamics we’ve seen, with dollar weakness continuing much of this current quarter,” Colin Asher senior economist at Mizuho said.

The dollar index measuring the greenback against a basket of six currencies was 0.111% lower at 91.561, its lowest since March 18. For the week the index was down 0.7%, set for its second straight weekly decline.

San Francisco Fed President Mary Daly said the U.S. economy was still far from making “substantial progress” toward the central bank’s goals of 2% inflation and full employment, the bar the Fed has set for beginning to consider reducing its support for the economy.

That echoed Fed Chair Jerome Powell’s comments in several speeches over the past week that policymakers will look through near-term rises in prices amid ongoing slack in the labour market.

On Friday, the U.S. Treasury Department said it will continue enhanced engagement with Vietnam and Switzerland, and initiate similar talks with Taiwan after concluding all three countries met the criteria under a 2015 U.S. currency manipulation law.

The Canadian dollar strengthened 0.3% against its U.S. counterpart, turning higher for the week, as oil prices gained and the broader decline for the greenback offset domestic data showing a bigger-than-expected drop in wholesale trade.

In cryptocurrencies, bitcoin stood around $61,648.71, below the record high of $64,895 reached on Wednesday, when cryptocurrency platform Coinbase this week made its debut in Nasdaq in a direct listing.

Reporting by Saqib Iqbal Ahmed in New York and Ritvik Carvalho in London; additional reporting by Sujata Rao in London and Kevin Buckland in Tokyo; editing by Larry King, Kirsten Donovan, and Marguerita Choy; Reuters

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