Dollar clings to most of its gains as risk sentiment improves

TOKYO — The dollar held on to most of its gains on Tuesday, following a sharp rebound on improving investor risk sentiment as worries over North Korea and Hurricane Irma receded.

The dollar index, which tracks the greenback against a basket of six major rivals, was steady at 91.874, after it skidded to a 2-1/2-year low of 91.011 on Friday.

The euro was little changed at $1.1955 after shedding 0.7 percent overnight. The common currency reached $1.2092 on Friday, its highest since January 2015, as the dollar suffered a broad retreat.

Higher US Treasury yields also bolstered the dollar, as the benchmark US 10-year note yield rose to 2.135 percent from its close of 2.125 percent on Monday, and 2.061 percent on Friday.

"Some people said the dollar's fall and recovery was not strange, since US yields got so low," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

"But the market is still sensitive to risk-off news, maybe from North Korea, or from disappointing US economic data," he said. "So that's why the dollar is still struggling to find its way."

The dollar was steady at ¥109.39 after rallying 1.4 percent on Monday, its biggest one-day surge since mid-January.

It had slumped to a 10-month low of ¥107.320 on Friday, when Hurricane Irma threatened Florida and as financial markets braced for the possibility of another missile or nuclear test to mark North Korea's founding day on Sept. 9. The yen tends to benefit during times of economic and political uncertainty due to Japan's net creditor nation status.

But Pyongyang's anniversary passed without further tests, and Irma lost strength and was downgraded to a tropical storm after battering Florida over the weekend.

"Receding fear over Hurricane Irma and North Korea was a key factor behind the dollar's bounce. Market focus is likely to return to fundamentals, although there aren't many major events scheduled this week that could decide the direction for currencies," said Shin Kadota, senior strategist at Barclays in Tokyo.

Major US allies in Asia welcomed on Tuesday the UN Security Council's unanimous vote to step up sanctions on North Korea, with its profitable textile exports now banned and fuel supplies to the reclusive North capped after its sixth nuclear test.

The Swiss franc, often sought in times of global risk aversion along with the yen, was flat at 0.9560 per dollar. The franc had rallied to a two-year high of 0.9421 on Friday.

The pound edged up 0.1 percent to $1.3175 after losing 0.25 percent on Monday.

Sterling fared better against the euro, brushing a fresh one-month high of 90.83 pence, aided by speculation that the Bank of England may sound more hawkish on interest rates in defense of the currency at its policy meeting on Thursday.

The Australian dollar was 0.2 percent lower at $0.8015, extending its retreat from a two-year peak of $0.8125 scaled on Friday.

The Chinese yuan pulled further away from Friday's 21-month high against the dollar of 6.5432, after China's central bank on Monday lifted measures put in place to support the yuan when it came under selling pressure. — Reuters

Dollar at three-year high, bonds gain as Greek deal eyed

London — The dollar climbed to a three-year high on Monday and gold was hovering near a three-year low after last week's strong US jobs data fed expectations that the country's central bank could soon wind back stimulus.

The dollar index, which measures the greenback against a basket of major currencies, rose to 84.588, its highest since July 2010, before a slight dip in early European trading left it at 84.450.

Friday's US jobs data bolstered the view the Federal Reserve will soon start reducing its long-running stimulus program, but analysts are now wondering whether the dollar's recent rise can continue at the same pace.

"Clearly the dollar is on the front foot and so the question is: can it sustain the momentum?" said Rabobank senior currency strategist Jane Foley.

"As it gains ground it acts as implicit monetary tightening so that could make some of the Federal Reserve governors quite nervous. I do think there will be plenty of opportunity to take some profits in these dollar positions."

After falls in Asia, Europe's broad FTSEurofirst 300 stock index started the week up 1 percent, regaining some of the ground lost at the end of last week. London's FTSE, Frankfurt's DAX and Paris's CAC 40 climbed 1 - 1.3 percent.

Investors expect Greece to reach a deal over its latest aid payment at a meeting of euro zone finance ministers later in the day, and there was relief after weekend moves to calm Portugal's political crisis.

Europe's bond markets were calmer as a result with benchmark German Bunds and euro zone periphery debt all higher after last week's turmoil in Portugal and Greece and Friday's strong US data.

Egypt tensions

The Fed's plans to cut back its current $85-billion-a-month bond buying program has been the main driver of financial markets over the last month, driving up global bond yields and triggering big swings in other asset markets.

Gold, often favored as a hedge against inflation which can be a by-product of stimulus programs, was near a three-year low at $1,227.59 an ounce after its recent sell-off.

Emerging markets have been particularly hard hit by the Fed's policy shift. Investors had directed much of the cheap Fed cash into emerging assets in search of higher yields and that trend is now reversing as investors look to increase their exposure to the United States again.

The Indian rupee hit a record low on Monday, leading declines among emerging Asian currencies, with sentiment also bruised by China's plan to choke off credit in a bid to force consolidation in industries plagued by overcapacity.

Elsewhere, the rising US dollar nudged Brent crude oil futures below $108 a barrel, although an escalation of political tensions in Egypt prevented too much slippage.

State television said 42 people were killed on Monday in Cairo, when the Muslim Brotherhood said shots were fired at supporters of deposed President Mohamed Mursi near the military building where he is being held.


"What's underpinning the strength in the oil market is the tensions out of the Middle East," said Ben Le Brun, an analyst at OptionsXpress in Sydney. "That's going to continue to put a floor under oil prices." — Reuters

source: gmanetwork.com