The dollar retains its strength on rising yields; Non-farm payroll in sight



By Peter Nurse – The dollar rose in early European trade on Tuesday, helped by rising U.S. Treasury yields, but traded below last week’s high as investors await Friday’s jobs release in the United States for clues to the Federal Reserve’s thinking about reducing bond purchases.

At 2:55 am ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 94.015, just below the 94.504 level seen last week, its highest level since September 2020.

USD / JPY rose 0.3% to 111.17, EUR / USD fell 0.2% to 1.1597 and GBP / USD fell 0.1% to 1.3594. The risk-sensitive AUD / USD fell 0.4% to 0.7257 after the Reserve Bank of Australia reiterated it did not plan to hike interest rates until 2024 after maintaining its policy stable monetary policy, as expected, at its last meeting.

The dollar benefited from rising bond yields as investors worried about the lack of agreement in the US Congress on the country’s debt ceiling, with US policy appearing more partisan than ever.

The benchmark 10-year US Treasury now returns nearly 1.50% after President Joe Biden said on Monday evening he could not guarantee the government would not exceed its debt limit of 28.4 trillion dollars, as the United States faces the risk of a historic default in just two years. weeks.

A recent set of data has also helped the dollar paint a picture of a dying pandemic and a recovering economy, fueling expectations that the Federal Reserve could start tightening monetary policy sooner than expected.

With that in mind, the focus for most of this week will be on Friday’s non-farm wage release, with the Fed undoubtedly seeking a stronger labor market recovery after the disappointing August release.

This job publication is expected to show continued improvement in the labor market, with a forecast of 488,000 jobs created in September, up from 235,000 jobs added the previous month.

“Almost everyone loves the greenback right now, and it’s easy to explain why: Investors are waiting for the US Fed to confirm its remarks on a rapid reduction of the quantitative easing (QE) program through equities,” said Dmitriy Gurkovskiy, analyst. at RoboForex.

Elsewhere, the Reserve Bank of New Zealand is expected to make its latest policy decision on Wednesday and is expected to rise by 25 basis points, while the Reserve Bank of India will make its own policy decision on Friday. Romania’s central bank is also set to become the last in Central and Eastern Europe to raise interest rates.

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