U.S Dollar Strengthens Amidst Rising Yields
The U.S dollar may continue to see a modest firming early this year mainly due to strong US economic growth and expectations of interest rate hikes by the Federal Reserve, Wells Fargo Investment Institute said in a note.
The analysts said the dollar has been appreciating since June 2021 on the back of US advantages over other developed countries on economic growth, the impact of higher fuel prices, supply chain issues, and COVID-19 vaccination rates.
Wells Fargo said it believes these catalysts may persist in the near future along with the likely increase in the Federal Reserve’s policy rate.
The analysts said a firmer dollar may be a challenge for US-based companies that get a high percentage of revenue from global markets. When the greenback appreciates, overseas earnings have to be converted into the more expensive dollars to bring earnings home, they noted.
Elsewhere, US Treasury has been rising, 10-year instrument hitting 1.89% after gaining more than 7 basis points in a single trading day. The 10-year US Treasury yield jumped to its highest intraday level in two years.
US Treasury Reports Net Securities Inflows Accelerated
The US Treasury reported Tuesday that there was a net combined $223.9 billion inflow of long-term, short-term and banking flows in November, compared with a $139.3 billion inflow in October.
Long-term securities transactions represented a $137.4 billion inflow overall and a $105.3 billion inflow after adjustment for estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities.
Short-term transactions were a net $65.3 billion inflow, while bank liabilities were a net $53.3 billion inflow. By country, Japan remained the largest holder of Treasury securities with $1.32 trillion, followed by China with $1.065 trillion. # U.S Dollar Strengthens Amidst Rising Yields
