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FOREX-Dollar firms as U.S. yields tick up ahead of Fed guidance

FOREX-Dollar firms as U.S. yields tick up ahead of Fed guidance

· 03/17/2021 04:50
FOREX-Dollar firms as U.S. yields tick up ahead of Fed guidance

Dollar firm after three days of gains ahead of Fed

Fed 2023 rates projections under scrutiny

Euro may be hampered by delay in vaccine rollouts

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

Adds comment; updates prices

By Julien Ponthus

- The U.S. dollar firmed on Wednesday with 10-year Treasury yields close to 13-month highs ahead of a Federal Reserve policy meeting which could shed some light on the timing of future rate hikes and the central bank’s tolerance for rising yields.

With Fed policymakers expected to forecast the fastest U.S. economic growth in decades in the wake of COVID-19 vaccinations and $1.9 trillion in new stimulus, market participants will be focused on clues that the central bank could start raising rates in 2023, earlier than it had said. nL1N2L82OT

In any event, expectations of a faster-than-expected economic recovery will likely weigh.

"U.S. yields might receive further upwards thrust and pull the dollar along with them in the absence of a clear commitment on the part of the Fed that a further rise in yields is undesirable", Commerzbank Antje Praefcke analyst wrote in a morning note.

She added that because the European Central Bank had in contrast committed to increase the pace of bond buying to keep a lid on rising yields, the euro might suffer against the dollar in the short term.

The euro EUR= was down 0.07% at $1.1893 after declining in the past three sessions.

Hurt by a possible delay in the European Union's vaccination effort, the euro seemed set to test last week's 3 1/2-month low of $1.18355.

Europe's medicines watchdog will release results of its investigation into incidents of bleeding, blood clots and low platelet counts in recipients of AstraZeneca's AZN.L coronavirus vaccine on Thursday afternoon. nL1N2LE1CE

Europe's painful recovery from the pandemic is in sharp contrast with other economies which seem less dependant on monetary stimulus to pull though.

The Bank of Canada for instance is likely to reduce its bond purchases as soon as next month, strategists say. nL1N2LA30S

In morning trades in Europe, the dollar index ticked up 0.09% and stood at 91.953 =USD, having already risen for three straight sessions on support mainly from elevated U.S. bond yields.

Benchmark 10-year Treasury yields US10YT=RR were also ticking up at 1.6340%. They had reached 1.6420% on Friday for the first time since February 2020.

Against the yen, the greenback firmed 0.15% to 109.14 yen JPY=, hovering near nine-month highs hit this week.

The British pound was up 0.14% at $1.3914 GBP= recovering from profit-taking after it hit a near three-year high last month on the back of a fast vaccine rollout.

Commodity-linked currencies including the Australian dollar AUD=, the New Zealand dollar NZD= and the Canadian dollar CAD= eased slightly against the U.S. dollar, tracking weakness in commodity prices. MET/L O/R

In the cryptocurrency market, bitcoin BTC=BTSP fell 2.1% to $55,708.79, slipping further away from a record high of $61,781.83 hit on Saturday.

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Currency bid prices at 843 GMT

Description

RIC

Last

U.S. Close
Previous
Session

Pct Change

YTD Pct
Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

$1.1894

$1.1903

-0.08%

-2.66%

+1.1908

+1.1887

Dollar/Yen

JPY=D3

109.1250

109.0200

+0.12%

+5.67%

+109.2000

+109.0950

Euro/Yen

EURJPY=

129.80

129.75

+0.04%

+2.25%

+129.9300

+129.7200

Dollar/Swiss

CHF=EBS

0.9279

0.9248

+0.34%

+4.89%

+0.9280

+0.9248

Sterling/Dollar

GBP=D3

1.3914

1.3895

+0.14%

+1.85%

+1.3929

+1.3880

Dollar/Canadian

CAD=D3

1.2461

1.2448

+0.10%

-2.14%

+1.2462

+1.2434

Aussie/Dollar

AUD=D3

0.7729

0.7746

-0.19%

+0.49%

+0.7747

+0.7724

NZ Dollar/Dollar

NZD=D3

0.7182

0.7190

-0.11%

+0.01%

+0.7194

+0.7174










All spots FX=

Tokyo spots AFX=

Europe spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX


(Reporting by Hideyuki Sano in Tokyo and Sagarika Jaisinghani in Bengaluru; Editing by Sam Holmes, Gerry Doyle and Andrew Cawthorne)

((hideyuki.sano@thomsonreuters.com; +81 3 4520 1195;))