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U.S. Dollar Near Month High as Yields Rise

A gauge of the dollar was 0.1 percent from the highest in almost a month as an increase in short-term U.S. Treasury yields signaled mounting expectations the Federal Reserve will raise interest rates.

The 20-day correlation between dollar-yen and yields on two-year Treasuries climbed yesterday to the highest since March, before a report today that may show consumer-price inflation held at the fastest pace since October 2012. The Australian dollar remained lower amid speculation Reserve Bank Governor Glenn Stevens will reiterate that the currency is overvalued when he speaks at a luncheon today.

“The U.S. dollar seems to be showing more sensitivity to what’s happening at the front end of the U.S. yield curve,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “That obviously reflects the view that the shorter end is taking on board the risk that the Fed could be minded to move on rates a little earlier than previously priced in.”

Bloomberg [1]

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