Dollar Climbs 10-week High as Yields Strengthen

The dollar rebounded on Friday to reach a 10-week high against the yen, driven by higher US Treasury rates that urged investors to pursue yields into the greenback.

Optimism for the US currency sent the safe-haven yen to a 10-week low of 111.98, while the dollar gained 0.1 percent to $96.148 against its major peers.

The Japanese currency, along with the Swiss, another safe-haven currency, strengthened earlier in the week due to the India-Pakistan tensions and as negotiations between the US and North Korea failed, making markets lose their composure.

High Yields Attracting Investors

The greenback returned to a positive stance after the Commerce Department reported that US gross domestic product (GDP) grew at a 2.6 percent annualized rate in the fourth quarter compared with the 2.3 percent average forecast of economists.

The latest US economic data drove the benchmark 10-year Treasury yields to its highest level since February 6 of 2.731 percent on Thursday, boosting demand for the dollar.

The 10-year bond yield, which has added 7 basis points this week, last stood at 2.740 percent on Friday.

Investors are also relying on the greenback for yield as US interest rates are higher than those in other developed economies.

Growing confidence in market also supported the Australian dollar on Friday, advancing by 0.1 percent to 0.7104 against its US counterpart, having experienced losses a day earlier after disappointing Chinese manufacturing data overshadowed strong figures on domestic business investment.

Elsewhere, the euro shed 0.1 percent to 1.1360, before rising by 0.1 percent to 1.1387 against the dollar, keeping the single currency firmly in the trading range where it has been caught in for many months.

Major currency pairs such as the euro/dollar has been treading water after other central banks followed the Federal Reserve’s dovish tone shift in January.

Strategist Kit Juckes said January’s central bank policy pivot is either a counter-attack in the face of mounting threats to growth and inflation, or a retreat in the face of the asset market weakness at the end of 2018, points to a protracted period of low volatility in currency markets.

The British pound also fell 0.01 percent to 1.3260 against the greenback as investors bought back into the sterling due to the possibility of the UK avoiding a disorderly departure from the European Union (EU) and might delay its exit from the bloc.

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