Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

FOREX-Dollar benefits from Powell's optimism, hits 6-mth peak vs yen

Published 18/07/2018, 01:58 pm
Updated 18/07/2018, 02:00 pm
© Reuters.  FOREX-Dollar benefits from Powell's optimism, hits 6-mth peak vs yen

© Reuters. FOREX-Dollar benefits from Powell's optimism, hits 6-mth peak vs yen

* Dollar/yen pops above 113.00 threshold for fist time since Jan

* Powell shows upbeat view on US economy, downplays trade war risk

* Sterling struggles near 3-wk lows vs dollar amid Brexit woes (Adds details and quotes, updates prices)

By Shinichi Saoshiro

TOKYO, July 18 (Reuters) - The dollar rose across the board on Wednesday, climbing to a six-month high against the yen, after Federal Reserve Chairman Jerome Powell gave an upbeat outlook for the U.S. economy and reinforced views that the Fed was on track to steadily hike interest rates.

In closely watched congressional testimony on Tuesday, Powell said he saw the United States on course for years more of steady growth, while largely discounting the risks associated with a trade war. dollar was up 0.05 percent at 112.955 yen JPY= after going as high as 113.08, its strongest since January 9.

The euro dipped 0.05 percent to $1.1653 EUR= after losing 0.4 percent overnight.

An easing of risk aversion was reflected on Wall Street, which rose overnight and supported Asian stocks on Wednesday after Powell's optimistic analysis of the U.S. economy.

"The dollar stands to gain further, particularly against the yen, with risk aversion in the equity markets petering out," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"And while long-term Treasury yields are not rising prominently, this is a reflection of investor demand for U.S. assets that generates a degree of dollar-buying."

The 10-year Treasury yield US10YT=RR firmed this week but it has been on a steady decline from a seven-year high above 3 percent set in May.

The two-year Treasury yield US2YT=RR , most sensitive to the market's views on changes in Fed policy, has risen to a decade-high.

As a result the U.S. yield curve was the flattest in 11 years and close to inverting, a phenomenon in which the two-year yield becomes higher than the longer-dated Treasury yield.

An inverted yield curve is sometimes seen as a sign of waning confidence towards the economy and a signal for a recession.

"The correlation between the yield curve and the dollar has been relatively unstable. Taking this into account, currencies are unlikely to show a strong reaction if the curve does invert," said Tohru Sasaki, head of market research at JPMorgan Chase (NYSE:JPM) Bank.

The pound was little changed at $1.3110 GBP=D3 after slipping 1 percent the previous day.

On top of the dollar's broad strength, sterling has come also under pressure from disquiet over British politics.

The currency fell to a three-week low of $1.3068 overnight as investors expected more Brexit challenges after Theresa May's government only narrowly won a parliamentary vote on post-Brexit trade with the European Union.

The dollar index against a basket of six major currencies .DXY edged up 0.1 percent to 95.038 after rising roughly 0.5 percent the previous day.

The Australian dollar was a shade lower at $0.7384 AUD=D3 , extending the retreat from Tuesday when it lost 0.45 percent against a broadly stronger greenback.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Dollar index, US yield curve

https://reut.rs/2L5hrzF

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.