Steady As U.S. Yields Edge Up On Housing Data
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[May 17, 2014]
By Richard Leong
NEW YORK (Reuters) - The
dollar held a slim gain against a basket of major
currencies on Friday as benchmark U.S. Treasury yields
edged up from their lowest levels in six months,
although the greenback faces further weakness if yields
resume their decline.
The dollar pared earlier modest losses against the Japanese yen and
euro after a stronger-than-expected report on U.S. housing
"Falling yields have been problematic for the dollar," said Richard
Franulovich, senior currency strategist at Westpac Banking Corp in
New York. "Bond yields look too low here against this economic
The decline in the dollar and U.S. Treasuries yields came in the
face of encouraging domestic economic data in recent weeks. On
Friday, the government said housing starts rose 13.2 percent to 1.07
million annualized units in April, the strongest level since
The bond market's rally has confounded analysts and traders who
reckoned it will eventually peter out and the dollar will rebound
from current levels.
Benchmark U.S. 10-year Treasury yields were last at 2.518 percent,
up from the six-month low of 2.473 percent on Thursday. The 10-year
yield is set to fall nearly 11 basis points this week. <US/>
The dollar traded at 101.45 yen, above a two-month low of 101.31 yen
set on Thursday and its 200-day moving average of 101.20 yen which
analysts peg as a key support.
The greenback gained a touch against the euro, trading at $1.3697
after falling to $1.3648 on Thursday, its lowest since late
February. It rose 0.4 percent on the week against the euro, putting
it on track for back-to-back weekly increases.
Against the yen, the euro slipped 0.2 percent at 138.96 yen after a
three-month low of 138.77 yen earlier.
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Thursday's disappointing euro zone growth data raised expectations
the European Central Bank will embark on more stimulus at its June
policy meeting, and some investors are betting that the euro could
grind lower in coming weeks.
Traders also pointed to funds moving to safety after a sell-off in
Greek bonds halted a rally in debt of weaker euro zone members. The
sell-off in peripheral bonds, if it gathered pace, was likely to
hurt the euro, traders said.
The yield on 10-year Greek bonds edged up 2 basis points to 6.851
percent, its highest since late March.
"We have a lot of volatility in Europe especially the last two
days. I find it hard for the euro to rally from here," Franulovich
The implied one-month euro/dollar volatility, the expected price
swings over the coming month, has risen this week from 7-year lows
to 5.8 percent on Friday.
(Additional reporting by Anirban Nag in London; Masayuki Kitano in
Tokyo; Editing by Chizu Nomiyama and Richard Chang)
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