© Reuters. FILE PHOTO: Banknotes of one US dollar are seen in front of the displayed stock chart
By Hideyuki Sano
TOKYO (Reuters) – The dollar fell to a two-week low against a basket of currencies on Wednesday after US bond yields fell as traders returned to positive expectations that the Federal Reserve will tighten their policy sooner than committed.
The index touched a two-week low of 92,314, sliding further from a five-month high of 93,439 set on March 31.
The euro rose to a two-week high of $ 1,18785 and stood at $ 1.1871 for the last time. The single currency is up almost a pence against the pound overnight to trade at 85.90 pence, the biggest gain since Dec. 10.
The dollar changed hands at 109.77 yen, extending its retreat from a one-year high of 110.97 touched a week ago.
The dollar’s decline comes as investors re-adjust their expectations that the Federal Reserve will tighten their policy sooner than proposed.
Financial markets had been expecting rapid US economic growth and inflation could force the Fed to give up on commitments sooner, with the pricing of interest rate futures contracts in a rate hike as soon as possible. at the end of 2022 at the beginning of this week.
However, the yields on the 5-year US Treasury note plunged to 0.874% after hitting a 14-month high of 0.988% on Monday.
The 5-year treasury yield is now considered the primary measure of investors’ confidence in the Federal Reserve’s commitment that they won’t raise interest rates until 2024.
Traders see the dollar’s pullback as a correction after its rally last month. In particular, against the yen, the dollar saw the biggest monthly gain in more than four years in March, up nearly 4 percent.
“Last quarter, the dollar was fueled by the Senate outflow in Georgia, the Biden administration’s coronavirus bailout and then the infrastructure plan. This quarter we’re running out of big topics like And the market will move towards economic fundamentals. We expect dollar Shinichiro Kadota, senior currency strategist at Barclays (LON :).
Elsewhere, the Aussie held close to a two-week high against the dollar at $ 0.7661 while the pound fell to $ 1.3830 from a two-week high yesterday. Tuesday is $ 1,3910.
unchanged at $ 57,966.
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