NEW YORK: The dollar strengthened on Tuesday as the yen came under pressure from a sharp fall in Japan’s long-dated bond yields, while the greenback was boosted by data showed improving US consumer confidence.
“It’s very much being driven by global bond markets, and most recently what we’ve seen in Japan,” said Eric Theoret, FX strategist at Scotiabank in Toronto. “Market participants are reading into the fact that the Ministry of Finance sent out a questionnaire to their primary dealers about issuance.”
Bloomberg reported on Tuesday that the Ministry of Finance sent a questionnaire to market participants regarding issuance and current market issues. Japan will consider trimming issuance of super-long bonds in the wake of recent sharp rises in yields for the notes, two sources told Reuters on Tuesday.
The plan comes amid a recent spike in super-long bond yields to record levels due to dwindling demand from traditional buyers such as life insurers and global market jitters over steadily rising debt levels.
The dollar was last up 1% at 144.26 Japanese yen. The euro fell 0.27% to $1.1356.
The greenback added to gains after data showed US consumer confidence in May was much better than economists had expected.
The euro, meanwhile, was dented by data showing that French inflation fell to its lowest level since December 2020 in May.
The dollar was also boosted after US President Donald Trump on Sunday dropped his threat to impose 50% tariffs on European Union imports from next month. The decision gave ‘new impetus’ to trade talks, the EU said on Monday.
Investors are concerned that tariffs will hurt growth and potentially reignite inflation, though traders have become less pessimistic on the US economic outlook since the United States and China earlier this month reached a deal to slash tariffs they had imposed on each other.
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