Published: Wed, May 16, 2018
Business | By Tara Barton

US Dollar Surges, Boosted By Sales Data And Rising Bond Yields

US Dollar Surges, Boosted By Sales Data And Rising Bond Yields

The dollar hovered near a five-month high against a group of major currencies on Wednesday, as a surge in the benchmark 10-year Treasury yield above 3 per cent reignited a rally that had lost steam last week.

The 10-year yield neared 3.1 percent, blowing through the key psychological level of 3 percent it hit in late April for the first time in four years.

On the economic front, advance estimates of U.S. retail and food services sales for April were 497.6 billion U.S. dollars, an increase of 0.3 percent from the previous month, in line with market expectations, said U.S. Commerce Department on Tuesday.

The dollar inched higher against a basket of currencies on Tuesday, having pulled up from its lowest level in more than a week as hopes for easing global trade tensions pushed U.S. bond yields higher. Between rising yields and a stronger currency, year-to-date returns in gold have dipped into negative territory.

The yield, a barometer for mortgage rates and other financial instruments, has jumped recently on signs of rising inflation, which sparked market speculation for more rate-hikes later this year.

The dollar index that measures the greenback's strength against a basket of six major currencies gained 0.2 percent to $93.41, hovering close to its highest level since December 22 of 93.45 achieved on Tuesday.

Gold spike about $10 to the downside on the release as trader saw the US Treasury yields development.

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"A little bit of today's jitters are related to a hangover to yesterday's wrongly placed exuberance that a trade deal was imminent and the reality is we are in for a long slugfest between the USA and China", Mackay said.

Home Depot shares fell 1.7% after the home improvement chain missed Wall Street's sales forecast.

The pan-European FTSEurofirst 300 index.FTEU3 rose 0.14 percent. The country's GDP growth fell by 0.6 percent in the first quarter, which is its first economic weakness in nine quarters, amid losses in investment and consumption, and weaker export growth.

"After the U.S. CPI (consumer price inflation) data the dollar's momentum has fallen off", said Alvin Tan, an FX strategist at Societe Generale.

US crude CLcv1 rose 0.55 percent to $71.35 per barrel and Brent LCOcv1 was last at $78.41, up 0.23 percent on the day.

After its most recent bottom around $1,303, gold is now above $1,294. This article is strictly for informational purposes only. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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