A steady rise in German bond yields weakened the dollar on expectations of further policy tightening from the European Central Bank.which narrowed the spread with Treasury yields, said Marc Chandler, head of market speculation at Bannockburn Global Forex.
“I played down the importance of the elections. For monetary and fiscal policy, I don’t think there will be much difference”he said and expanded: “What I’m focusing on today is a big move in German 2-year bonds. It’s not about the Fed, it’s about more aggressiveness by the ECB.”
The two-year bond yield rose to 2,196%, a gain of 25 basis points from a week ago.
CPI data is due to be released on Thursday, with economists forecasting a slight decline in the basic monthly and annual figures to 0.5% and 6.5% respectively.
The euro was up 0.48% at $1.0067, while the Japanese yen strengthened 0.72% against the dollar at $145.57.
“The Fed could raise interest rates by 50bps when policymakers meet in December, again that same amount in February, and another 25bps at their March meeting,” said Ed Moya, senior market analyst at OANDA.
“The interest rate differential with other currencies favors the strength of the dollar, as do the risks of severe recession abroad and China’s continued struggles with the Covid-19 restrictions,” Moya added.
The Chinese yuan had its best day in two years on Friday and held most of those gains ever since.but pulled back a bit on Tuesday to trade at 7.2553 per dollar as fresh outbreaks of COVID-19 eroded some of the optimism.
Source: Ambito
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