U.S. Dollar Ticks up as Treasury Yields Rise

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The U.S. dollar firmed on Wednesday, as global financial markets were gripped by a surge in U.S. bond yields.

Benchmark U.S. 10-year Treasury yields inched higher, resuming a move toward a 16-year peak of 5.0 percent briefly breached on Monday. The 10-year yield was last at 4.9506 percent on Wednesday.

The dollar index, which measures the greenback against six major peers, rose 0.24 percent to 106.5245 in late trading.

The interest rate for a 30-year fixed-rate U.S. home loan last week jumped to 7.9 percent, the highest since September 2000, the Mortgage Bankers Association (MBA) reported on Wednesday.

“Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995,” said Joel Kan, MBA vice president and deputy chief economist. “These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity.”

Strategists at Citibank said the purchasing managers index data was “yet another sign that a recession is not imminent.”

“We continue to think the U.S. economy will enter recession next year, but in the meantime, risks are balanced toward further Federal Reserve hikes, rather than cuts,” they wrote in a note Wednesday.

While in the eurozone, the German IFO Business Climate Index arrived at 86.9 in October, up from the previous month’s reading of 85.8 while beating the market expectations of 85.9.

In late New York trading, the euro decreased to 1.0567 U.S. dollars from 1.0589 U.S. dollars in the previous session, and the British pound was down to 1.2115 U.S. dollars from 1.2162 U.S. dollars.

The Bank of Canada (BoC) announced on Wednesday that it left the benchmark interest rate unchanged at 5 percent following the October policy meeting.

“Overall, inflationary risks have increased since July. Inflation is on a higher path than we expected… We held the policy rate steady because we want to allow monetary policy time to cool economy and relieve price pressure,” said Tiff Macklem, governor of the BoC.

In late New York trading, the U.S. dollar rose to 1.3793 Canadian dollars from 1.3730 Canadian dollars. The U.S. dollar bought 150.0070 Japanese yen, higher than 149.8990 Japanese yen of the previous session. The U.S. dollar was up to 0.8967 Swiss francs from 0.8932 Swiss francs, and it rose to 11.1441 Swedish krona from 11.1128 Swedish krona. 

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