NEW YORK: The dollar rose on Tuesday, testing several-month highs against major peers, underpinned by volatile oil prices and a recent rapid climb in Treasury yields, while the Aussie struggled as traders saw a dovish message hidden inside a rate hike.
The euro dropped by as much as 0.32percent to USD1.13325, a three-month low, and a fall past its late June levels would take it to the lowest in well over a year, as the currency struggles in the face of a global energy shock and growing political risk in Europe.
But it is by no means unique.
The pound fell 0.25percent to USD1.3221, again in sight of three-month lows hit last week, while the Swiss franc was also weaker at 0.8335 per dollar, its softest in four months. Beyond domestic European reasons for weakness that are sending its currencies lower on the dollar, the greenback also is strengthening. Elevated oil prices and a storming economy have markets pricing in meaningful rate hikes by the Federal Reserve.
That in turn has sent Treasury yields higher across the curve, with the two-year yield - more important than longer dated peers for currencies -around its highest in two years and closing in on the symbolic 5percent level. That yield was a whisker lower on Tuesday, and oil prices steadied, with Brent crude futures at USD104.5 a barrel, though still at painful levels for many energy intensive industries. But investors and analysts are increasingly shifting their view on the dollar.
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