NEW YORK- The dollar advanced against major currencies on Friday, hitting a more than one-week high, after the Federal Reserve allowed a pandemic-driven break on capital requirements lapse, pushing US Treasury yields off their lowest levels of the day.
The greenback in recent weeks has risen in line with higher Treasury yields. Since early January, the dollar index, a gauge of its value against six major currencies, has gained about 3.3 percent, with the benchmark US 10-year note climbing about 80 basis points in the same timeframe.
The Fed announced on Friday it would let expire on March 31 a temporary rule directing larger banks to hold more capital against their assets, such as Treasuries.
The Fed had put the rule in place to encourage bank lending as American households and businesses were hurt by lockdowns.
The dollar index was last up 0.1 percent on the day at 91.906. It had fallen sharply in the wake of the Fed’s announcement about its loose policy stance on Wednesday.
On the week, the dollar climbed 0.6 percent, posting gains in the three of the last four weeks.
“News that the US Treasury SLR exemption is not being extended has given the dollar a little support, again largely via the rise in US Treasury yields,” said ING in a research note.
“The near disorderly rise in US Treasury yields at some points this year have certainly undermined a market biased to buy activity currencies on dips. The SLR news certainly adds an element of caution here.”