SINGAPORE- The dollar held firm on Monday supported by growing expectations of further rate hikes by the US Federal Reserve, though news that a debt ceiling deal had been finalized drew some of the safe haven bids away from the greenback.
The US dollar notched a fresh six-month high of 140.91 yen in early Asia trade before reversing some of those gains to last trade at 140.39 yen. It was on course for a monthly gain of about 3 percent against the Japanese currency.
The yen’s renewed decline has come on the back of rising US Treasury yields, as bets grow that interest rates in the United States would stay higher for longer.
Data released on Friday showed that US consumer spending increased more than expected in April and inflation picked up, adding to signs of a still-resilient economy.
Yields on US Treasuries jumped on the back of the data, with the two-year yield which typically reflects near-term interest rate expectations, rising to an over two-month high of 4.639 percent on Friday.
Cash US Treasuries were untraded in Asia on Monday, owing to the Memorial Day holiday in the United States, while futures were broadly steady. Ten-year futures’ implied yield was 3.84 percent.
The UK market is similarly closed on Monday for a holiday.
Against the dollar, the euro edged 0.02 percent higher to $1.0735, while sterling slipped 0.01 percent to $1.23495.
“Whether the dollar sustains the rally that we’re seeing, I think it’ll depend on particularly the wages data, or average earnings within Friday’s payrolls report, and obviously we’ve got CPI before the Fed as well,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB). -Reuters
