FILE PHOTO: U.S. greenback banknotes are displayed on this illustration taken, February 14, 2022. REUTERS/Dado Ruvic
By Saikat Chatterjee
LONDON (Reuters) – The greenback climbed to its highest ranges in 20 years on Monday as a mixture of rising U.S. Treasury yields and a tightening lockdown in China boosted the secure haven attraction of the buck.
Towards a basket of main currencies, the greenback topped 104.19 for the primary time since July 2002, extending its virtually 9% rise this yr.
The greenback’s rise has been aided by a relentless march larger in U.S. Treasury yields. On Monday, yields on ten-year benchmark debt hit 3.18% for the primary time since Nov 2018. They’ve doubled over the previous two months.
“It’s laborious to go towards the present momentum for larger yields and U.S. greenback power within the close to time period,” Mizuho strategists stated in a every day observe.
Although the height in U.S. rates of interest within the present mountaineering cycle is seen at round 3.5% in mid-2023, the velocity of the Federal Reserve’s charge mountaineering cycle is much larger than its friends on the Financial institution of England and the European Central Financial institution.
That’s evident within the euro zone the place current hawkish feedback by policymakers have prompted buyers to start out repricing charge expectations though projected charge hikes in Europe will lag america by a giant margin.
Cash markets count on america to boost rates of interest by one other 200 bps through the the rest of the yr, taking benchmark charges to just about 3%, whereas a projected 92 bps of hikes by the ECB will simply take its benchmark deposit charge into optimistic territory.
The Fed hiked its benchmark funds charge by 50 foundation factors final week and robust jobs information has bolstered bets on additional huge hikes, with inflation figures due on Wednesday in focus as subsequent danger of an upside shock.
The expansion delicate Australian greenback fell 1% to $0.6999, its lowest since February. Sterling and the New Zealand greenback hit 22-month lows, whereas the euro and yen have been barely above current main troughs.
Cryptocurrencies have been battered within the rush from dangerous belongings and bitcoin was nursing weekend losses and close to its lowest ranges of the yr at $33,500 whereas ether, which fell 4% on Sunday, was at $2,440.