USD making gains, supported by higher government bond yields

The USD made some gains and managed to recover from a three-year low on Thursday. The dollar was supported as rising yields on US Treasuries prompted some investors to buy the greenback, but the markets are still cautious about expectations.

US Treasury yields rose for two years to 2.06%, their highest level since 2008, while 10-year Treasury yields rose by 2.60%, their highest value since last year. This encouraged some investors to back down their expectations of the dollar’s decline, which led to the decline of the US currency more than 2% by the beginning of 2018. It should be pointed out here that in 2017, the dollar fell against the other major currencies by 10%.

The Dollar Index, which measures the strength of the greenback against a range of major currencies, rose by 0.2%, reaching 90.73 points. The euro remained steady at the high of 0.1% against the dollar, trading at $1.2194, but remains below yesterday’s record high of $1.2323, EUR/USD’s highest level since December 2014. The Canadian dollar fell against the USD by 0.1%, with the pair trading at 1.2450, after the Bank of Canada raised interest rates with caution about the future of the North American Free Trade Agreement (NAFTA).

The sterling pound rose above $1.39 on Wednesday, the highest since Britain’s exit from the European Union in mid-2016. The British currency recorded gains of more than 5% against the dollar over the past two months, strongly supported by Britain’s success in securing a payment agreement in late December. The EU exit talks are moving forward into discussions on a transitional period and trade between the two sides after the break-up.

On Thursday, the US Treasury Department announced its intention to launch a new round of bonds for a total of $78 billion. The ministry said it would issue $26 billion in bonds on Tuesday, and 5-year bonds worth a total of $34 billion on Wednesday, ending the week, with a $28 billion sale of seven-year bonds on Thursday. Last week, the Treasury sold $66 billion worth of bonds through three offerings. Three-year bonds worth $24 billion, 10-year bonds worth $20 billion and 30-year bonds worth $12 billion were sold.