TOKYO- The dollar touched a one-month high versus the yen on Wednesday, boosted by a climb in Treasury yields to multi-year peaks overnight as traders wait on US inflation data this week for clues on the pace of Federal Reserve policy tightening.
The euro continued to retreat from near a three-month high to Japan’s currency after European Central Bank President Christine Lagarde earlier this week tapped down expectations of aggressive interest rate hikes.
A more hawkish tone from both the ECB and the Fed last week caught markets off guard and sent yields soaring on euro zone and US debt in anticipation rates could rise faster and higher than previously expected.
The dollar rose at one point in early Asian trading to 115.69 yen, the highest since Jan. 10, before pulling back to last trade 0.08 percent lower at 115.43.
The 10-year Treasury yield surged as high as 1.97 percent on Tuesday for the first time since Nov. 2019.
The yield on the two-year note, which is more sensitive to interest rate expectations, reached 1.347 for the first time since February 2020.
Markets are pricing in more than a 70 percent chance of a 25 basis point hike and a nearly 30 percent chance for a 50 basis point hike when US policymakers meet in March, according to CME’s FedWatch Tool.
High US inflation may go even higher before getting better, San Francisco Fed President Mary Daly said on Tuesday. – Reuters
