Dollar gains on rally in U.S. yields
|The greenback rose against majority of its peers on Tuesday while U.S. Treasury yields rose to a 2-year high on continued speculation that the Federal Reserve may raise its rates sooner rather than later (U.S. 10-year yields ended at 1.872, up by 0.004 or 0.20%)
Versus the Japanese yen, dollar jumped in Asian morning to an intra-day high at 115.05 on usd's broad-based strength on BoJ's unchanged rate decision. However, lack of follow-through buying there triggered profit-taking and the pair retreated to 114.46 again in New York morning due partly to cross-buying in jpy before trading sideways.
Reuters reported the Bank of Japan on Tuesday raised its inflation forecast for the fiscal year beginning in April and said risks to the price outlook were evenly balanced, nodding to recent signs the commodity-driven rise in inflation was broadening. As widely expected, the central bank kept unchanged its -0.1% target for short-term interest rates and a pledge to guide 10-year government bond yields around zero. "Risks to prices are generally balanced," the BOJ said in a quarterly report released on Tuesday, adding there was a risk that rising raw material costs could prod firms to pass on higher costs to consumers at a faster pace than expected.
The single currency briefly gained to 1.1421 in Asian morning, however, price met renewed selling there and tumbled to an intra-day low at 1.1315 near New York close on usd's broad-based strength.
The British pound met renewed selling at 1.3661 in Asian morning and dropped to 1.3622. The pair continued to ratchet lower in European morning on usd's broad-based strength together with cross-selling in sterling especially vs euro and fell to an intra-day low at 1.3573 in New York morning before stabilising.
Data to be released on Wednesday:
New Zealand retail sales, U.K. CPI, RPI, PPI input prices, PPI output prices, DCLG house price index, Germany CPI, EU current account, construction output, U.S. MBA mortgage application, building permits, housing starts, redbook and Canada wholesale trade.
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