Dollar hits 11-month high vs yen as upbeat US data, hawkish Fed boost yields

The dollar hit an 11-month high against the yen and stood tall against other its peers on Thursday, boosted by a spike in Treasury yields following upbeat U.S. data and comments from Federal Reserve Chairman Jerome Powell that were seen as hawkish.

The dollar stretched an overnight rally to touch 114.55 yen, its highest since early November 2017. It last stood at 114.345. A rise above 114.735 yen would take the U.S. currency to its highest level since mid-March 2017.

Adding to the bullish mood, Powell said on Wednesday that the central bank may raise interest rates above an estimated “neutral” setting as the “remarkably positive” U.S. economy continues to grow.

The dollar also was boosted after the Institute for Supply Management’s (ISM) non-manufacturing activity index jumped 3.1 points to 61.6 last month, the highest reading since August 1997.

The ADP National Employment Report also showed private payrolls jumped by 230,000 jobs in September, the largest gain since February.

“The dollar stands to outperform together with the rise in long-term Treasury yields ahead of Friday’s non-farm jobs report, possibly reaching the 115.00 yen handle,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

“The Trump administration could turn its attention to the dollar and check its rally. But any slowdown by the dollar is likely to be temporary, as the Trump administration has in effect allowed the currency to strengthen under its economic policies.”

President Donald Trump has on several occasions expressed displeasure at the dollar’s strength.

The dollar index against a basket of six major currencies was up 0.35 percent at 96.086 and was close to a six-week peak of 96.116 scaled overnight.

U.S. Treasury yields jumped to multi-year peaks on Wednesday, with the 10-year yield reaching a seven-year high after Wednesday’s robust data bolstered the case for the Fed to raise interest rates again in December and beyond. [US/]

“The Fed stands poised to keep hiking rates in the near term and sentiment towards the dollar has shifted significantly,” said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

“Currency bears dependent on a dollar-selling strategy have been repeatedly forced to buy back the dollar at ever higher levels over the past months.”

The euro was 0.05 percent lower at $1.1469 after slipping about 0.6 percent on Wednesday.

Before caving in to the dollar’s broad surge, the single currency had climbed to $1.1594 earlier on Wednesday on reports that Italy plans to reduce its budget deficit over the next three years.

The pound was steady at $1.2933 following a dip overnight to a 3-1/2-week low of $1.2925.

The Australian dollar extended overnight losses, slipping to a three-week trough of $0.7091.

Source: Reuters