US Dollar rises to 10-1/2-month peak as Treasury Yields surge



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US Dollar rises to 10-1/2-month peak as Treasury Yields surge

On Tuesday, the US Dollar Index (DXY) measured against a basket of six major currencies mushroomed as much as 0.4 per cent, hitting the strongest in more than ten months and a half, as soaring US Treasury Yields had rekindled appetite for the safe-haven US Dollar amid loudening whispers of an earlier-than-anticipated hike in benchmark borrowing cost from the US Federal Reserve.

In point of fact, since US Fed’s September policy meet last week that had narrated strong intent to taper fiscal support for the economy in a near term and to introduce a rate-hike as early as by 2022, US Treasury Yields had begun to spur up, while on Tuesday, US 10-year Treasury bond notes had spiked to a three-month high and were last trading at 1.525 per cent.

Apart from US Fed’s policy statement which had signalled a near-term tapering of fiscal support for the economy as beforementioned, US Treasury Secretary Janel Yellen was quoted saying earlier in the day that the US Govt.

would run out of money by October 18 unless US Federal Reserve could lift the cap on its borrowing limit, pressing the US Central Bank further to hit the break-pedal on a soaring inflation through a near-term tapering of fiscal support alongside an increase in the interest rate while reviving a safe-haven bid for the American currency and US Treasury Yields.

Meanwhile, citing a plausible short-term increase in safe-haven appetite for government bonds with prospects of further rise in inflations before the US Fed could kick in, a chief market strategist at Cambridge Global Payments in Toronto, Karl Schamotta, said, “Yields are generally moving higher as rising inflation expectations weigh on the relative attractiveness of government bonds, but are climbing even faster in the United States as traders bet the Federal Reserve will move more quickly than its global counterparts.

US Dollar, Treasury Yields gain ground

Citing statistics, in the day’s late-afternoon US trading hours, the US Dollar Index (DXY) was trading 0.4 per cent higher to 93.71, the strongest level since early-November 2020, while the Australian Dollar, widely contemplated as a proxy for risk-appetite and global economic health, declined as much as 0.6 per cent to $0.7240.

The bloc’s single currency euro, shared among 19 eurozone member states, fell 0.1 per cent to $1.1681 against its American counterpart, hitting a six-week low, while British Pound was pummelled as much as 1.2 per cent to $1.3532 as risks mounted over a shortage in lorry drivers during a busy holiday season ahead.