NEW YORK: The dollar held just below two-year highs against a basket of currencies on Monday as it continued to be supported by higher US Treasury yields, while the euro rallied after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the country’s first round of presidential voting.
The greenback has gained as Treasury yields soar on expectation of more aggressive tightening by the Federal Reserve, with benchmark 10-year note yields reaching 2.78% on Monday, the highest since January 2019.
But the euro looked set to snap a seven-day losing streak against the US currency, rising 0.12% to $1.0888. The US dollar index was last at 99.94, after reaching 100.19 on Friday, the highest since May 2020.
“There was maybe a bit of a relief rally, but it’s going to be hard for the euro to really get more upside traction until the event risk fully passes,” said Erik Nelson, a macro strategist at Wells Fargo in New York.
Macron will face Le Pen in what promises to be a tightly fought French presidential election runoff on April 24.
Meanwhile, the dollar continued to gain against the yen, which reached its weakest level since mid-2015. The Japanese currency has deteriorated as the Bank of Japan (BOJ) maintains a more dovish posture compared to increasingly hawkish peers such as the Fed.
“What we’ve heard from the BOJ so far has been very consistent that they’re not concerned about this move (in the yen) and, if anything, they’re comfortable with the move,” said Nelson. “Given the way rates are moving, the attractiveness of selling the yen and earning a positive rate of interest on that trade, that’s going to continue to be a one-way bet for I think quite a while.”
The dollar gained 0.95% to 125.46 yen.
China’s yuan weakened against the dollar on investor concern over capital outflow and currency depreciation pressure after benchmark yield differentials between the Asian economic powerhouse and the United States turned negative.
Yields on China’s 10-year government bonds fell below US Treasury yields for the first time in 12 years as investors prepared for more monetary easing on the mainland and a widening divergence between the US and Chinese economies.
The Russian rouble weakened sharply in jittery trade on Monday, reversing some of the previous week’s gains, after the central bank decided to relax temporary capital control measures aimed at limiting a drop in the currency.
In cryptocurrencies, Bitcoin fell to three-week lows, and was last down 2.37% at $41,152. Ether fell 4.89% to $3,046.