Dollar gains across the board as Powell sticks to script
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[March 05, 2021] By
Joice Alves and Ritvik Carvalho
LONDON (Reuters) - The dollar rose to
multi-month highs against the euro, yen and Swiss franc on Friday after
Federal Reserve Chair Jerome Powell expressed no concern about a recent
sell-off in bonds.
Speaking at a Wall Street Journal forum, Powell stuck to his stance of
keeping interest rates low until the economy has recovered, adding that
the sell-off in Treasuries was not "disorderly".
The Swiss franc fell to a seven-month low of 0.93110 francs per dollar
and was flat at 0.92765 by 1153 GMT. The euro slipped 0.3% to a
three-month low of $1.19345.
"The U.S. dollar rose sharply higher post-Powell comments (as) many in
the market I sense were looking for stronger rhetoric from the Fed to
put a break on further rallies in yields," said Neil Jones, head of FX
sales at Mizuho Bank.
"We didn't get it and the dollar is pushing higher across the board on
expectations of further increases in U.S. yields."
The dollar index rose 0.3% to 91.907, a three-month high. Its gains came
as the benchmark 10-year Treasury yield jumped back above 1.5%. Last
week, the Treasury yield soared to a one-year peak of 1.614%.
Versus the yen, the dollar rose 0.4% to a nine-month high of 108.39 yen.
Japanese Finance Minister Taro Aso declined to comment on the yen's
decline when asked about how the depreciation would affect the economy.
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U.S. one dollar banknotes are seen in front of displayed stock graph
in this illustration taken February 8, 2021. REUTERS/Dado Ruvic/Illustration/File
Photo
"With the BOJ's (Governor) Kuroda saying that the BOJ has no need to change its
yield guidance, the yen is, along with the Swiss franc, taking the brunt of the
dollar's yield-fuelled recovery," said Kit Juckes, chief FX strategist at
Societe Generale. "Both look cheap, but the yen in particular isn't cheap enough
yet".
A rollout of COVID-19 vaccines and impending U.S. fiscal stimulus have boosted
confidence in an economic recovery, adding fuel to expectations of higher
inflation.
Riskier currencies, including the Australian and New Zealand dollars, slid along
with stocks as investor sentiment again turned sour.
The Aussie weakened 0.6% to $0.76690, an almost one-month low. The kiwi fell
0.7% to $0.7133.
Sterling briefly fell below $1.38 to a three-week low. It was last down 0.5% at
$1.3826
In the cryptocurrency market, bitcoin fell 1.8% to $47,493. Ethereum dropped
3.9% to $1,478.03.
(Reporting by Joice Alves and Ritvik Carvalho in London; additional reporting by
Kevin Buckland and Sagarika in Tokyo and Sagarika Jaisinghani in Bengaluru;
editing by Larry King, Kirsten Donovan)
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