Dollar maintains firm bias on rising U.S. yields, hits 3-1/2 month highs vs yen

Market Review - 17/05/2018  23:31GMT  

Dollar maintains firm bias on rising U.S. yields, hits 3-1/2 month highs vs yen

The greenback was broadly higher against majority of its peers on Thursday due to a continued rise in U.S. Treasury yields, suggesting a positive outlook for the U.S. economy. The benchmark 10-year Treasury yield hit a fresh near 7-year highs of 3.122%. Sterling went through a roller-coaster ride after initial gain in Asia and tumbled in European morning after UK government dismissed a report that Britain will remain in European Union's customs union beyond 2021.  
Versus the Japanese yen, despite falling to 110.08 in Asian morning on broad-based usd's weakness, price found renewed buying and rallied to 110.73 in European morning, then ratcheted higher to a fresh 3-1/2 month high of 110.86 in New York due to rising U.S. Treasury yields.  
Although the single currency recovered to 1.1838 in Asian morning on short covering, price erased intra-day gains and fell to session lows of 1.1777 in European morning as investors were concerned that the new coalition government in Italy would increase the possibility of exiting EU before rebounding to 1.1811 shortly after New York open on short-covering, price traded narrowly in subdued New York session ended the around 1.1793 near the close.  
The British pound went through a hectic volatile session. Despite rallying to 1.3569 in Asian morning on U.K. media report Britain will stay in EU's customs union beyond 2021, price erased intra-day gains and fell sharply to 1.3494 in European morning after UK government's denial of earlier report before rebounding to 1.3538. Cable then met renewed selling there and ratcheted lower to session lows of 1.3473. Price later rebounded to 1.3526 in New York on short-covering.  
Reuters reported Britain will tell Brussels it is prepared to stay in the European Union's customs union beyond 2021 as ministers remained deadlocked over a future deal with the bloc, the Telegraph newspaper reported on Wednesday.  
Reuters reported a source in Theresa May's Downing Street office has dismissed a media report saying that Britain would tell Brussels it was prepared to stay in the European Union's customs union beyond 2021.   
In other news, Reuters reported the leaders of Italy's anti-establishment 5-Star Movement and the far-right League on Thursday gave their approval to a joint policy programme for their planned coalition government, a 5-Star source said.   
5-Star leader Luigi Di Maio and League chief Matteo Salvini are still discussing who should be prime minister of the new administration, but had made progress on the issue, the source said.   
Reuters reported the British government will take its time to consider amendments passed by the upper house of parliament to the EU withdrawal bill, but will not shelve the key piece of Brexit legislation, Prime Minister Theresa May's spokeswoman said on Thursday  
On the data front, initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 222,000 for the week ended May 12, the Labor Department said on Thursday. Claims data for the prior week was unrevised. Economists polled by Reuters had forecast claims rising to 215,000 in the latest week.   
Data to be released on Friday :  
Japan national CPI, national core CPI, Germany producer prices, wholesale price index, EU current account, trade balance, and Canada CPI, CPI BoC core, retail sales, retail sales ex-autos.  

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