Dollar Trades Strong as U.S Treasury Yields Rise Sharply
The United States (U.S) dollar was firmer against its major trading partners early Monday as markets look forward to a busy week of data and Fed speeches while Treasury yields adjust to demand levels.
The US Treasury’s 5-year auction hit a high yield of 2.543% on Monday, well above the 1.88% high in the previous auction. The bid to cover ratio for the auction was 2.53, above the 2.49 ratio in the previous auction.
Dealers represented 58.77% of the bids, with direct bidders at 12.2% and indirect bidders at 29.03%. For takedown, dealers took 20.05%, with direct bidders at 19.74% and indirects were awarded 60.2%
Also, the US Treasury’s 2-year auction hit a high yield of 2.365% on Monday, up sharply from the 1.553% high in the previous auction. The bid to cover ratio for the auction was 2.46, below the 2.64 ratio in the previous auction.
Dealers represented 54.43% of the bids, with direct bidders at 13.71% and indirect bidders at 31.76%. For takedown, dealers took 19.43%, with direct bidders at 25.55% and indirects were awarded 55.03%.
Monday’s schedule starts the week off slowly, but it picks up after that. Advance trade data for February will be released today and the Dallas Fed’s regional manufacturing reading for March is scheduled for release.
The highlight of the week will be Friday’s employment report for March, which is expected to show slower payroll growth after a 678,000 jobs surge in February, but a dip in the unemployment rate.
Other data releases this week include consumer confidence for March on Tuesday, the final estimate of Q4 GDP on Wednesday, personal income and spending data for February on Thursday, and the PMI and ISM manufacturing readings for March on Friday.
Multiple Fed speakers last week, including Chairman Jerome Powell, suggested that one or more 50-basis-point fed funds rate increases are on the table for some time this year, the first one possible at the May 3-4 meeting. More speeches are scheduled for this week.
A quick summary of foreign exchange activity heading into Monday shows that USD-CAD rose to 1.2481 from 1.2466 at the Friday US close and from 1.2523 at the same point Friday morning after a string of declines.
There are no Canadian data releases scheduled for Monday. The highlights of the week are Canadian gross domestic product (GDP) on Thursday and manufacturing PMI on Friday.
The Bank of Canada is expected to tighten further at its next policy announcement on April 13 in response to high inflation, with the possibility of a 50 basis points increase.
USD-JPY rose to 124.1468 from 122.138 at the Friday US close and 122.08 at the same point Friday morning. There are no Japanese data release scheduled for Monday.
The week’s highlights include Japanese unemployment on Tuesday, retail sales on Wednesday, industrial production on Thursday and manufacturing PMI on Friday. READ: UK Inflation to Rise Sharply for Next Six Months, Says Fitch
The Bank of Japan made efforts overnight to defend its ultra-low interest rate cap by buying bonds, unlike most central banks that have begun monetary policy tightening and are preparing to move faster in the near future to remove accommodation in the face of rising inflation.
GBP-USD fell to 1.3133 from 1.3194 at the Friday US close and from 1.3184 at the same point Friday morning. There is no UK data scheduled for release on Monday.
UK GDP will be released Thursday, followed by manufacturing PMI on Friday. Bank of England Governor Andrew Bailey said Monday morning that there are risks in both directions to economic outlook, particularly from inflation.
The BOE is seen raising rates further at its next meeting in May. Bank of England member Catherine Mann speaks at 9:00 am ET. EUR-USD was roughly unchanged at 1.0984 from 1.0983 at the Friday US close and was down from 1.1013 at the same point Friday morning.
There are no EU data releases scheduled for Monday. Consumer confidence will be released on Wednesday, with manufacturing PMI and inflation data scheduled for Friday. Given the situation in Ukraine, European Central Bank officials expressed caution regarding the pace of its tightening cycle.
#Dollar Trades Strong as U.S Treasury Yields Rise Sharply
