US dollar rises from 9-week lows in step with higher Treasury yields

New York — The dollar recovered from Thursday’s nine-week lows as US Treasury yields rose after the government reported strong economic growth in the first quarter and new unemployed billing improvements last week.

US benchmark 10-year Treasury yields rose 2 basis points to 1.639% on Thursday, boosted by bright economic reports.

According to the data, gross domestic product increased at an annual rate of 6.4% in the first quarter, the second fastest growth since the third quarter of 2003. Growth in the first quarter was due to consumer spending, with a pace of 2.3% in the fourth quarter.

Another report on Thursday showed that the US’s first claim for state unemployment benefits fell by 13,000 to seasonally adjusted 553,000 during the week ending April 24.

“Certainly a big part of the dollar’s move is today’s rise in yields. There was a pretty close correlation between FX and rates,” said Eric Nelson, macro strategist at Wells Fargo Securities in New York. I will.

“Everyone was happy with the cut in interest rates and the dollar was crushed in April. Now that yields are rising and a little more stable, we’ll see a stronger dollar,” he added.

Strong economic growth usually increases the value of the dollar. As growth progresses, spending increases, which pushes prices up. As prices have risen, the Federal Reserve has historically intervened by raising interest rates to prevent inflation.

In the afternoon trading, the dollar index, a measure of the value of the greenback against six currencies, rose 0.1% to 90.596. Previously, the index reached its lowest level since February 26th. The depreciation of the dollar also pushed the euro to a nine-week high, after which the single currency fell 0.1% to stabilize at around $ 1.2116.

The dollar fell on Wednesday after Federal Reserve Chairman Jerome Powell weakened speculation about the early contraction of the U.S. central bank’s bond purchase program and said employment was still well below target. ..

The Federal Reserve Board’s doves are in sharp contrast to the Bank of Canada, which has already begun to curtail asset purchases, with the US dollar slipping into a three-year valley against the Canadian dollar. The greenback fell 0.2% against the Canadian currency of 1.2281 Canadian dollars.

The US dollar struggled overnight after President Joe Biden called for an additional $ 1.8 trillion in spending, at risk of expanding the US budget and trade deficit. This is the long-standing Achilles heel of the greenback.

However, the yen struggled against the dollar even after the Bank of Japan announced earlier this week that inflation could not reach its main 2% target until early 2023.

The dollar rose 0.3% against the yen of 108.88 yen.

In the cryptocurrency market, Ethereum, the second largest digital currency by market capitalization, hit a record high of $ 2,800.89 on Thursday.The last was $ 2,732.09, down 0.7%.

Ethereum continues to attract institutional investors, especially with the explosive growth of decentralized finance (DeFi), a crypto platform that facilitates lending outside traditional banking institutions. These platforms are built on the Ethereum blockchain.

Gertrude Chavez-by Dreyfuss and Kate Duguid

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