Dollar gets lift from higher U.S. yields

The dollar stood tall against a basket of currencies in early Asian trading on Thursday, though it remained in its recent range as investors awaited minutes of the last Federal Reserve meeting for clues on monetary policy.

The dollar index .DXY, which tracks the U.S. currency against a basket of six major rivals, was up about 0.1 percent at 95.595, in the middle of the 93.718-96.700 range in which it has traded since late August.

Later in the session, the Fed will release the minutes of its September meeting. Investors will be scrutinizing the text for clues on when the Fed will implement the first interest rate increase since 2006 later this year or wait until 2016.

Higher U.S. Treasury yields underpinned the dollar as equities rallied on expectations the Fed might hold off on hiking, with the yield on the benchmark 10-year note US10YT=RR at 2.065 percent in Asian trading, up from its U.S. close on Wednesday at 2.060 percent. The 10-year yield hit a one-week high of 2.086 percent overnight.

The yen crept slightly higher, but gains were capped by expectations that the Bank of Japan will unveil more stimulus steps as early as this month.

The BOJ held monetary policy steady on Wednesday, but slumping exports and falling oil prices have kept pressure on the central bank to come up with an additional stimulus plan that might be announced after at its next meeting on Oct. 30, when it is also expected to cut its long-term economic and price forecasts.

Data released early on Thursday underscored the weakening momentum of Japan’s economic recovery. The government cut its official assessment of machinery orders to say that they are stalling, as core orders in August dropped 5.7 percent from the previous month, confounding consensus expectations for a 3.2 percent gain.

The dollar was buying 119.92 yen JPY=, down about 0.1 percent. The euro was trading at 134.76 yen EURJPY=, down about 0.1 percent.

The euro was slightly lower at $1.1235 EUR=.

The European Central Bank’s next policy decision will come on Oct. 22.

“We believe that the deposit rate cut is an option for the ECB. However, it is the least likely to be used in the near term,” strategists at Barclays said in a note to clients.

Instead, they said they believe that the ECB will initially act by expanding the size, scope and length of its quantitative easing purchases, and is likely to announce this by year-end.

The Bank of England will announce its latest policy decision later in the session and is expected to hold steady. Ahead of this, the pound was nearly flat from late U.S. trade at $1.5311 GBP=D4.

Source: Reuters