A steady rise in German bond yields weakened the dollar on hopes of further policy tightening from the European Central Bank.Mark Chandler, head of market speculation at Bannockburn Global Forex, said the spread narrowed with the Treasury yield.
“I downplayed the importance of elections. For monetary and fiscal policy, I don’t think there will be much difference”He added and expanded: “What I’m focusing on today is a big move in German 2-year bonds. It’s not about the Fed, it’s about more aggression by the ECB.”
The two-year bond yield rose to 2,196%, up 25 basis points from a week earlier.
CPI data is due to be released on Thursday, with economists forecasting a marginal decline of 0.5% and 6.5%, respectively, in the original monthly and annual figures.
The euro was up 0.48% at $1.0067, while the Japanese yen was up 0.72% at $145.57 against the dollar.
“The Fed may raise interest rates by 50 bps when policymakers meet in December, then the same amount in February, and another 25 bps at the March meeting,” Ed Moya, senior market analyst at OANDA, said.
“The interest rate differential with other currencies favors the dollar’s strength, as does the risk of a severe recession overseas and China’s ongoing struggle with COVID-19 sanctions,” Moya said.
The Chinese yuan had its best day in two years on Friday and has since made most of its gains.But it pulled back slightly to trade at 7.2553 per dollar on Tuesday as the fresh outbreak of COVID-19 eroded some optimism.
