Higher US Treasury yields help US dollar to partly offset recent decline

Posted 22 January, 2018

Today the American currency has reportedly somewhat recovered after the US government shutdown on weekend. The positive dynamics is related to higher yields of US state bonds. Investors, in their turn, took the Washington uncertainties with a good spirit.

The government stopped working on Saturday after the officials (in particular, the Democrats and Republicans) failed to agree on an extension of funding due to dispute on the immigration and border protection issues.

Meanwhile, the representatives of the parties in the Senate held talks on Sunday attempting to overcome disagreements. The Senate is expected to take a vote concerning the resolution of provisional funding of the government till February 8.

US political events do not surprise the market anymore, so insiders barely paid attention to the goings-on in Washington, as commented  FPG Securities.

In the first half of the day, the US Dollar index was detected at 90.631, which reflected a 0.1% recovery from 90.155. As a result, the rate stayed above a 3-year bottom at 90.113 hit last Thursday.

The euro changed hands at $1.2226, with no dramatic fluctuations.  

The US dollar improved vs the yen to $1 = JPY 110.78. The greenback got support from increasing yields of the state bonds. Specifically, yields of the 10-year bonds have remained on the rise today adding 2.672%, the highest level over 3.5 years.

The sterling-to-US dollar exchange rate decreased 0.3% to $1.3860. Thus, the rate left the Wednesday peak of $1.3942 on weak retail data in the UK.

The Australian dollar managed to gain 0.1% coming to $0.7993; NZD-USD rate showed no serious changes staying at 0.7276.

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