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.
“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.