US dollar strengthens as risk sentiment worsens, US bond yields rise

NEW YORK, Oct 25 (Reuters) – U.S. Treasury yields rose on Wednesday as investor appetite for riskier currencies waned following lackluster corporate results that raised concerns about the economic outlook. The US dollar rose marginally against a basket of currencies.

Risk sentiment took a hit as tech giant Alphabet (GOOGL.O) fell after its cloud division missed revenue expectations, while other mega-cap stocks also eased slightly, weighed down by rising U.S. Treasury yields. It became.

The dollar index, which measures the stock’s strength against a basket of six rival stocks, rose 0.2% to 106.46, hitting a nearly one-week high of 106.52.

“I think it’s mainly about the risk background,” said Sean Osborne, chief currency strategist at Scotiabank in Toronto. “Weak risk appetite appears to be driving the USD’s significant appreciation.

The yield on the benchmark 10-year U.S. Treasury note has edged higher, returning to the 16-year high of 5.0% it briefly topped on Monday. The 10-year bond yield was last at 4.9165%.

Global financial markets have been hit by a sharp rise in U.S. bond yields, which pushed the dollar index to its highest level in nearly a year earlier this month.

But analysts see limited room for yields and the dollar to rise.

“My tendency is to view these gains as an opportunity to soften some of the dollar’s strength against certain currencies,” Scotiabank’s Osborne said.

Elsewhere, the Australian dollar soared on Wednesday as unexpectedly high inflation fueled speculation of further interest rate hikes and weak bond futures. However, all of those gains were erased on the day, with the stock down 0.52%.

“What’s interesting about Australia is that many other central banks are in a similar position. They have paused and the market expects it to, but everyone expects inflation to remain normal. “We’re nervous in the hopes that it will move towards the end of 2020. That’s not the case in Australia,” said Jane Foley, head of currency strategy at Rabobank.

The Canadian dollar fell against the U.S. dollar after the Bank of Canada left its key overnight interest rate unchanged at 5.0% as expected, leaving room for further rate hikes to curb inflation while forecasting slower growth. Inflation could remain above target for another two years. .

The US dollar recently appreciated by 0.44% against the Canadian currency.

Additionally, the dollar remains close to the 150 yen mark, which is a close watch on the yen, and the Japanese currency is trading at 149.93 yen to the dollar, with traders wary of signs of intervention by the Japanese authorities.

Rising global interest rates have increased pressure on the Bank of Japan to change its bond yield management. Reuters reported this week, citing people familiar with the matter, that a possible increase in the existing yield cap, which was set just three months ago, is being discussed ahead of next week’s policy meeting.

“It’s entirely possible that there will be further adjustments to yield curve control,” Foley said. “If you don’t see it, there’s a good chance you’ll soon be looking at the other side of 150 degrees.”

Among cryptocurrencies, Bitcoin rose 1.39% on Tuesday to $34,390, hovering near an almost 18-month high.

The world’s largest cryptocurrency rose about 15% in the week, boosted by speculation that an exchange-traded Bitcoin fund was soon to be launched.

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