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FOREX-Higher yields underpin dollar, euro in focus before EU talks

* Dollar hovers at one-month highs vs yen

* U.S. yields rise as Fed rate hike view strengthens

* Euro in the doldrums as crucial Greek debt meetings loom

By Ian Chua

SYDNEY, Feb 11 (Reuters) – The dollar hovered at one-month highs versus the yen early on Wednesday, bolstered by gains in Treasury yields, while uncertainty over a new debt deal for Greece kept a cloud over the euro.

The dollar traded at 119.45 yen, having climbed as high as 119.62 overnight. Trade was thin with Japan on holiday.

The move came as benchmark U.S. yields popped above 2 percent for the first time in a month on views the Federal Reserve might lift interest rates by mid-2015.

Richmond Fed President Jeffrey Lacker, an inflation hawk, said a June hike was an “attractive option” and San Francisco Fed President John Williams said economic conditions are “getting closer” to the point where it made sense to think about starting to normalise policy.

Also weighing somewhat on the yen, Bank of Japan Governor Haruhiko Kuroda said there was no criticism from the G20 of its aggressive easing that had driven the yen lower.

The euro edged up to 135.12 yen, nearing the top end of its prevailing 132.0 to 135.35 range. The Australian dollar also firmed to 92.81 yen, but stayed well short of Friday’s 93.11 session high.

The euro zone common currency struggled to find direction against the dollar and last stood at $ 1.1315, having drifted in an unusually slim $ 1.1273-$ 1.1345 range on Tuesday.

Greece has made no progress so far in securing a new debt agreement without the shackles of an austerity program. Euro zone finance ministers meet later in the day to discuss Greece ahead of an EU summit on Thursday.

“Failure of the parties to find common ground or express optimism on progress could add to market nervousness during European evening/New York afternoon hours,” analysts at BNP Paribas wrote in a note to clients.

Against the greenback, the Aussie dipped back below 78 U.S. cents after China’s central bank dashed hopes of bold policy measures to boost growth. China is Australia’s biggest export market.

The People’s Bank of China said it would avoid any excessive credit stimulus that could stoke financial risks amid concerns about rising debt levels in Asia’s economic powerhouse.

The Aussie was last at $ 0.7774, back near the lower end of its $ 0.7733 to $ 0.7877 range.

Many major currency pairs have settled into ranges since reaching multi-year troughs against the greenback as investors searched for fresh impetus to adjust long dollar positions.

This can be clearly seen in the dollar index, which has been drifting between 93.250 and 95.331 for two weeks since peaking at an 11-year high of 95.481 on Jan 23. It was last at 94.735, up 0.3 percent.

(Editing by James Dalgleish)

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