TOKYO, Oct 19 (Reuters) – The dollar held firm against
major currencies on Thursday and gained against more volatile
ones, underpinned by the U.S. 10-year yield nearing the 5% level
and before remarks by Federal Reserve Chair Jerome Powell at a
discussion on the economy.
The dollar index, which tracks the unit against six main
peers, was at 106.5 steady on the day, having risen 0.33%
on Wednesday.
Its moves were more dramatic against currencies that are
particularly exposed to swings in global growth expectations,
with the Australian dollar and New Zealand dollars each down as
much as 0.6%. The New Zealand currency hit its lowest level in a
year of $0.5815.
The British pound, also traditionally more vulnerable to
global swings, was down 0.2% at $1.2118 while the euro
was 0.1% firmer at $1.05515. Neither currency was far
from multi-month lows hit in early October.
“Over the last day or so, the spike higher in yields has
hurt risk sentiment in markets, we saw a sell off overnight in
global equity markets and that risk-off trading is driving FX
markets particularly in the high-beta commodity currencies,” Lee
Hardman, senior currency analyst at MUFG, said.
“Other majors have been more stable, even as yields continue
to move higher. Maybe there is some caution ahead of Powell
later in the day.”
Both long and short-dated U.S. yields hit 16-year highs on
Thursday, with selling pushing the 10-year yield to almost 5%, a
psychologically significant level. European and Japanese bonds
were also under pressure.
Powell will participate in a discussion on the economic
outlook at the Economic Club of New York at 1600 GMT, a few days
before the traditional quiet period ahead of the rate-setting
Federal Open Market Committee meeting on Oct. 31-Nov. 1.
Prior to his remarks, policymakers appear to be agreement to
hold interest rates unchanged at their next meeting, but
uncertainty about what happens afterwards is high.
Other policymakers also face dilemmas. Japan is struggling
with a weak yen, and Japan’s top currency diplomat said on
Thursday that, although not acting in response to excessive
currency moves could hurt the vulnerable, it would be better if
they did not have to intervene.
The dollar was last at 149.82 yen, closing in on the
psychologically significant 150 yen level that earlier this
month triggered a sharp sudden strengthening for the yen,
although analysts say the indications suggest Japan did not
intervene.
Dollar/yen could be pushed higher depending on whether U.S.
yields continue to rise at a faster pace than their Japanese
peer yields, Carol Kong, currency strategist and economist at
the Commonwealth Bank of Australia, wrote in a note.
“The implication is the risk of FX intervention by the BoJ
remains high in our view,” said Kong.
The yen, a traditional safe haven, has not benefited much
from risk aversion due to the war in the Middle East, unlike the
Swiss franc, which has strengthened sharply.
The euro was last steady against the franc at 0.9471 though
hit a one-year low of 0.9449 francs the day before.
(Reporting by Brigid Riley; Editing by Lincoln Feast, Barbara
Lewis and Sharon Singleton)
