FOREX-U.S. dollar gains, tracks rise in Treasury yields

BY Reuters | ECONOMIC | 09/27/21 03:19 PM EDT
       * Dollar rises to nearly 3-month high vs yen
    * Euro falls after German elections
    * Focus on Fed speakers this week

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 27 (Reuters) - The U.S. dollar advanced for a second straight session on Monday,
bolstered by the rise in Treasury yields ahead of a slew of Federal Reserve speakers this week who could
affirm expectations of the start of asset purchase reduction before the end of the year.
    U.S. benchmark 10-year Treasury yields hit a three-month high of $1.516% on Monday.
    Fed officials, including one influential board member, on Monday tied reduction in the Fed's monthly
bond purchases to continued job growth, with a September employment report now a potential trigger for the
central bank's bond "taper."
    Fed Chair Jerome Powell, who will join Treasury Secretary Janet Yellen, speaks before Congress on
Tuesday.
    The dollar index, which measures the U.S. currency against six major rivals, rose 0.1% to 93.37.
    The greenback also extended gains after data showed new orders and shipments of key U.S.-made capital
goods increased solidly in August, rising 0.5% in August amid strong demand for computers and electronic
products.
    But the market has been more focused on the U.S. Treasury market.
    U.S. yields climbed to their highest since late June in anticipation of tighter monetary policy after
the Fed announced last week it may start tapering stimulus as soon as November and flagged interest rate
increases may follow sooner than expected.
     "As much as taper in and of itself is not a surprise, an earlier end to its program will reinforce that
downside risks to the U.S. dollar have diminished," Mazen Issa, senior FX strategist at TD Securities, wrote
in a research note.
    TD expects the Fed to end its quantitative easing program by June 2022.
    "If the last taper cycle was any indication, about half of the U.S. dollar's cyclical upswing was
observed three months after taper," he added.
    The euro slipped 0.1% against the dollar to $1.1698, largely ignoring developments in German
elections over the weekend, with the Social Democrats projected to narrowly defeat the CDU/CSU conservative
bloc.
    The dollar rose 0.3% versus the yen to 110.99 yen, after earlier rising to a nearly
three-month high. It gained 0.2% versus the Swiss franc to 0.9259 francs.
    "The buck has no real reason to decline from where it is, so it will be about looking for what may
actually change that as we hear from various sides this week: a new German leadership, a new Japanese head
of state, and the U.S. Congress," said Juan Perez, FX strategist and trader at Tempus Inc in Washington.
    The risk-sensitive Australian dollar rose 0.4% to US$0.7289 as fears of widespread market contagion from
indebted China Evergrande Group (EGRNF) ebbed.
    Concerns that Evergrande, China's second-largest developer, could default on its $305 billion of debt
have overshadowed trade in recent weeks, but some of those contagion fears are receding.
    The People's Bank of China injected a net 100 billion yuan ($15.5 billion) into the financial system on
Monday, adding to the net 320 billion yuan last week, the most since January.

    ========================================================
    Currency bid prices at 3:08 PM (1908 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
                                              Session
 Dollar index                 93.3840        93.2680     +0.13%         3.782%        +93.4940    +93.2060
 Euro/Dollar                  $1.1698        $1.1722     -0.20%         -4.25%        +$1.1730    +$1.1685
 Dollar/Yen                   111.0000       110.7350    +0.25%         +7.44%        +111.0600   +110.5300
 Euro/Yen                     129.84         129.75      +0.07%         +2.30%        +129.9300   +129.4900
 Dollar/Swiss                 0.9260         0.9243      +0.19%         +4.67%        +0.9291     +0.9246
 Sterling/Dollar              $1.3707        $1.3670     +0.29%         +0.34%        +$1.3729    +$1.3661
 Dollar/Canadian              1.2620         1.2657      -0.27%         -0.88%        +1.2672     +1.2610
 Aussie/Dollar                $0.7289        $0.7257     +0.42%         -5.26%        +$0.7291    +$0.7250
 Euro/Swiss                   1.0831         1.0831      +0.00%         +0.22%        +1.0864     +1.0825
 Euro/Sterling                0.8534         0.8565      -0.36%         -4.51%        +0.8583     +0.8528
 NZ                           $0.7019        $0.7015     +0.06%         -2.26%        +$0.7033    +$0.6990
 Dollar/Dollar
 Dollar/Norway                8.6030         8.5970      +0.10%         +0.22%        +8.6090     +8.5530
 Euro/Norway                  10.0653        10.0623     +0.03%         -3.84%        +10.0870    +10.0250
 Dollar/Sweden                8.6972         8.6462      +0.36%         +6.11%        +8.7080     +8.6294
 Euro/Sweden                  10.1741        10.1380     +0.36%         +0.97%        +10.1898    +10.1165


 

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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