The dollar traded near a two-week high against a basket of major currencies on Monday, bolstered by rising US bond yields, while easing concerns over global political risks weighed on the safe haven yen.
The dollar’s index against a basket of six major peers edged up 0.1 per cent to 90.401 .DXY, staying within sight of a two-week high of 90.477 set on Friday.
Rising US bond yields helped underpin the greenback, with the US 10-year Treasury yield touching a peak of 2.979 per cent US10YT=RR in Asian trade, the highest since January 2014.
Concerns that recent rises in global oil prices could add to inflationary pressures, as well as increases in US debt issuance, are likely contributing to the rise in Treasury yields, said Teppei Ino, a Singapore-based analyst for MUFG Bank.
“So this rise in yields is probably not something that should be welcomed,” Ino said.
“The market reaction for now is for the dollar to strengthen, but at the same time the dollar index hasn’t risen above its recent trading ranges,” Ino added.
The dollar index has traded in a range of about 88.25 to 91.00 since around the middle of January.
The rise in US bond yields pressured emerging Asian currencies, with the Indonesian rupiah IDR= hitting a two-year low of 13,895 per dollar.
Yen edges lower
Against the yen, the dollar hit a two-month high of 107.89 yen, and last changed hands at 107.80 yen JPY=, up 0.2 per cent on the day.
Easing concerns over global political risks weighed on the Japanese currency, market participants said.
The yen tends to attract demand in times of economic uncertainty and market turmoil, and sell off when confidence returns.
North Korea said on Saturday it would immediately suspend nuclear and missile tests, scrap its nuclear test site and pursue economic growth and peace instead. It made these comments ahead of planned summits with South Korea and the United States.
“The dollar momentum...is probably going to carry the way at least until the next negative headline comes out,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.
Even traders who had been bearish on the dollar seem to be looking for opportunities to take long positions, with the greenback seen underpinned for now by higher US bond yields, Innes added.
Besides concerns over geopolitical risks, worries over US-China trade tensions also appear to be waning, Innes said.
US Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease tensions between the world’s two largest economies.
The euro eased 0.1 per cent to $1.2274 EUR=, having set a two-week low of $1.2250 on Friday.
The common currency had slipped last week as investors trimmed long positions in the euro ahead of this week’s European Central Bank policy meeting at which policymakers are largely expected to signal no change in policy.
According to Reuters, sterling last changed hands at $1.4016 GBP=D3, up 0.1 per cent on the day. Last week, it fell 1.7 per cent, its biggest weekly drop since early February.
The pound fell last week on weaker-than-expected inflation and retail sales data and comments from Bank of England (BOE) Governor Mark Carney on Thursday, which traders interpreted as the BOE being less committed to raising rates in May due to recent “mixed” data.