Monday, October 18

Dollar stands tall as traders brace for tapering

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SINGAPORE — The dollar traded near its

highest levels of the year on Wednesday, after driving higher

with US yields and benefiting from investor nervousness about

the Federal Reserve starting to withdraw policy support just as

global growth headwinds gather.

The dollar rose broadly overnight to lift the dollar index

to an 11-month high of 93.805. It was marginally below

that level early in the Asia session at 92.728.

US Treasury yields have surged – with benchmark 10-year


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rates up 25 basis points in five sessions to 1.5548%

– As Fed tapering looms before the year’s end and as inflation

starts to look stickier than first thought.

The Japanese yen, which is sensitive to US

yields as higher rates can draw flows from Japan, has fallen

about 2% in five sessions and at 111.57 per dollar is not far

from hitting its lowest level since February 2020.

The euro fell to a one-month low overnight and,

last buying $1.1684, is also testing major support levels around

its 2021 low of $1.1664 and its November 2020 low of $1.1602.

Along with the Fed’s hawkish tone, energy prices are surging

and concerns are gathering about the growth outlook in China –

now at risk both from a messy collapse at developer China


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Evergrande and rolling power outages that are hitting output.

“Compared to the unencumbered optimism at the start of the

year, it is a twilight zone for markets as 2021 approaches its

end,” Deutsche bank strategists said in note that upgraded

forecasts on the dollar and recommended a bet against the euro.

“Persistently stagflationary dynamics – lower growth but a

hawkish Fed – leave little room for a dollar downtrend,” they


Sterling copped a particular beating overnight as

concern over the economic impact of a shortage of gas and a

scramble for fuel pulled it 1.2% lower on the stronger dollar,

its largest daily fall in more than a year.

The Australian and New Zealand dollars also suffered and the

kiwi hit a one-month low. Central bank meetings loom next week


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in both countries and swaps pricing points to the Reserve Bank

of New Zealand following Norges Bank and lifting rates.

“NZD/USD remains stuck around $0.7000, as the effect of the

hawkish RBNZ is offset by increasing expectations of the Fed,”

said Westpac analyst Imre Speizer.

The kiwi was last at $0.6947 and the Aussie

at $0.7248.

Ahead on Wednesday, Japan’s ruling party votes for a new

leader who will almost certainly become the country’s next prime


European Central Bank (ECB) President Christine Lagarde, Fed

Chair Jerome Powell, Bank of England Governor Andrew Bailey and

Bank of Japan Governor Haruhiko Kuroda are panelists at an ECB


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Currency bid prices at 0051 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Euro/Dollar $1.1684 $1.1684 +0.01% -4.37% +1.1687 +1.1683

Dollar/Yen 111.5550 111.4700 +0.10% +8.03% +111.6100 +111.5700


Dollar/Swiss 0.9293 0.9293 +0.00% +5.04% +0.9294 +0.9292

Sterling/Dollar 1.3538 1.3536 +0.04% -0.89% +1.3544 +1.3539

Dollar/Canadian 1.2674 1.2686 -0.09% -0.47% +1.2688 +1.2670

Aussie/Dollar 0.7245 0.7240 +0.08% -5.80% +0.7250 +0.7239

NZ 0.6948 0.6960 -0.13% -3.20% +0.6962 +0.6947


All spots

Tokyo spots

Europe spots


Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Kim Coghill)


In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.


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