Dollar rally dies down as yields decline By Reuters

By Tom Westbrook SINGAPORE (Reuters) – The dollar fueled losses on Wednesday, as a pullback in US yields sapped the momentum of its recent rally and investors cautiously resumed betting that it may resume the decline. Yields on benchmark 10-year Treasuries fell nearly 7 basis points from a 10-month high on Tuesday and the change ended a three-day streak for the dollar. [US/] Against the euro, it posted its steepest daily decline in more than a month and fell more than 1% against the pound, which was also driven by the governor of the Bank of England speaking against the prospect of negative rates. Australian and New Zealand dollars rose from week-long lows, lifting 77 cents above again to settle at $ 0.7680 and more than 72 cents to trade at $ 0.7226. [AUD/] The dollar fell through 104 Japanese yen to trade at 103.63 yen on Wednesday and also held gains to start the day on a one-week high in foreign trade. The moves push the dollar toward multi-year lows, although it remained above those levels in Asia as this week’s rebound dampened some traders’ confidence in the consensus view that US budget and trade deficits They will drive it lower. “The upward correction appears to be over and the downtrend has resumed,” ANZ analysts said in a note. “But with US asset markets in the driver’s seat, equities setting the stage for risk appetite, and US bonds leading the way in interest rate markets, it’s worth asking whether we can take the issue for granted. dollar weakness. ” The euro leveled off at $ 1.2208 and the dollar index held steady at 89.991 on Wednesday after falling 0.5% on Tuesday. The British pound hit a week high of $ 1.3680. [GBP/] The selloff in the bond market that boosted US yields strongly this year and halted the dollar’s decline was sparked by Democrats who gained control of the US Congress in elections in Georgia last week. Investors hope to introduce huge sums of government loans to finance big-spending stimulus plans and have calculated that higher US rates could make dollars more attractive. However, strong demand at an overnight 10-year $ 38 billion auction and comments from US Federal Reserve officials reiterating that monetary policy will remain supportive appear to have ignited once. plus the dollar torch. “The market has not yet given up on the short dollar, lower real yields, long reflation assets are trading,” said Chris Weston, head of research at Pepperstone brokerage in Melbourne. December inflation figures for the United States are due at 1330 GMT and, after Kansas City Fed Chair Esther George said overnight that she does not expect the Fed to react if inflation exceeds your 2% target can come as a big surprise to make investors nervous.

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