Dollar nears higher as Treasury yields rise, Reuters

From Kevin Buckland

TOKYO (Reuters) – Treasury yields were close to their highest level in 10 weeks against a basket of major currencies as they rose to new highs in the post-financial crisis era. Tuesday, amid speculation that US interest rates will remain high for a longer period.

China’s central bank supported the currency by setting a stronger-than-expected daily official midpoint. The yuan was steady in early trade under mounting pressure in recent weeks as investors grew impatient with China’s slow response to monetary policy despite a sluggish economy and slumping real estate sector.

The dollar index, which measures the U.S. currency’s performance against six developed market currencies such as the yen and the euro, fell 0.1 percent to 103.24, but was not far from silver’s high of 103.68, not seen since June 12.

“A rise in U.S. long-term yields and a disappointing response from Chinese policymakers to ongoing pressures in China’s real estate and financial markets continue to provide upward momentum for the U.S. dollar,” Westpac currency analyst Richard Franulovich wrote in a note.

“If Powell leaves the door open to raising (interest rates) … the U.S. dollar could develop,” Franulovich said of Federal Reserve Chairman Jerome Powell’s upcoming speech at the annual conference in Jackson Hole, Wyoming, on Friday.

Against the Japanese currency, the dollar fell 0.1% to 146.125 yen, after earlier rising to 146.425 and nearing Thursday’s peak of 146.565, the highest since Nov. 10.

Price is more sensitive to changes in long-term returns. The benchmark 10-year bond yield hit its highest level since November 2007 at 4.366 percent on Tuesday.

It rose 0.1 percent to $1.09055.

Meanwhile, China’s central bank on Tuesday set the yuan’s midpoint at 7.1992 per dollar in an attempt to end the currency’s slide after it fell to a nine-and-a-half-month low of 7.349 in offshore trade last week.

After rising about 0.1 percent after the Chinese central bank’s decision, the yuan was little changed in recent offshore trade and hit 7.2872.

The Australian dollar was little changed at $0.6413.

(Prepared by Towa Muhammad for Arabic Bulletin)