Dollar falls as bond yields fall and investor sentiment strengthens By Reuters

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2/2 © Reuters. US one dollar bills are seen in front of the stock chart shown in this illustration taken 2/2

By Saikat Chatterjee LONDON (Reuters) – The US dollar fell on Wednesday as investor sentiment improved and government bond yields extended their decline, while commodity-linked currencies such as the Australian and Canadian dollars rose. . Lower US bond yields also undermined some of the dollar’s appeal among underperforming currencies, with the yen and Swiss franc rebounding from multi-month lows overnight. Bonds have been at the center of a storm in the markets in recent weeks, following a jump in yields globally. Investors were betting that an economic recovery would raise inflation and lead central banks to normalize monetary policy as economies recovered from the COVID-19 pandemic. Global stocks fell from near-record levels and commodity prices staggered. But this week there has been a quiet return to the market, with yields falling and stocks rising. An index of the dollar against six of its major peers fell to 90.971 after retreating from a nearly a month high overnight. Analysts said they expected Federal Reserve Chairman Jerome Powell to reiterate recent comments by other lawmakers Thursday that any rate hike would be gradual and that the US economy was still far from the Fed’s targets. ” The Fed is rightly more concerned about the speed of the move than rising yields. The comments should help reduce volatility in the bond market and the bullish momentum of the US dollar in the near term, “analysts said. of MUFG in a Note. The 0.1% increase to $ 0.7828, based on gains of approximately 0.7% the previous two days, after data showed that the Australian economy grew much faster than expected in the fourth quarter. The Norwegian krone, another commodity-linked currency, traded mostly higher against the dollar and the euro after advancing about 1% in each of the last two sessions. The euro was little changed to $ 1.2086 after rising more than 0.3% in the previous session, when it rebounded from a nearly a month low below $ 1.20. European Central Bank board member Fabio Panetta said the bloc’s monetary authority should expand bond purchases or even increase the quota allocated to them if necessary to keep yields low. “Stock market reaction will be one of the key determinants of the impact of this movement on global rates in currency markets,” said Shinichiro Kadota, senior currency strategist at Barclays (LON 🙂 in Tokyo. The lull in volatility could prove fleeting if the improving US economy reactivates bond sales, with closely watched monthly payroll figures due on Friday. The British pound was trading 0.1% higher at $ 1.3973 ahead of the UK budget release, scheduled for 1230 GMT.

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