Yahoo Finance U.S. Dollar Index Pressured by Stronger Commodity-Linked Currencies
The U.S. Dollar rose against a basket of currencies early Monday as investors digested the outcome of the trade talks between the United States and China, which ended in a stalemate, but essentially was a truce between the two economic powerhouses. Traders said the buying may have been fueled by short-covering.
Whatever the reason, the buying was weak and the index may have turned lower in reaction to flat U.S. Treasury yields, or profit-taking ahead of the release of the Fed minutes on Wednesday. The dollar was also pressured by a recovery in the commodity-linked Australian, New Zealand and Canadian Dollars. The Euro also posted a gain after five consecutive lower closes.
June U.S. Dollar Index futures settled at 93.581, down 0.037 or -0.04%.
The commodity-linked Aussie, Kiwi and Loonie were underpinned on Monday after President Trump’s top Treasury official said the trade war with China is “on hold,” a truce that removed a big risk from the market for now. Over the weekend, Steven Mnuchin, the U.S. Treasury Secretary, cited “progress” in trade talks and said the economic rivals were “putting the trade war on hold.”
Fed Speaker Comments
There were no major economic reports on Monday, but scheduled to speak was FOMC Member Raphael Bostic.
Atlanta Federal Reserve Bank President Raphael Bostic said on Monday the U.S. economy is close to meeting the Fed’s employment and inflation goals, with growth of around 2.5 percent expected this year.
In prepared remarks to an economic group in Atlanta he did not update his views on interest rates, but has recently said he has a base case for two additional rate increases this year.
He also said that as the Fed debates possible changes to its inflation framework, he is “drawn to” systems that offset years of below- or above-target inflation with “misses” in the opposite direction.
U.S Treasury Markets
U.S. government debt yields were flat on Monday following last week’s sharp rise, when both the 10-year Treasury note and two-year Treasury note hit multiyear highs.
Bond traders said anticipation of the Fed minutes on Wednesday may have held the markets in check.
The yield on the benchmark 10-year Treasury note was unchanged at 3.058, and the yield on the 30-year Treasury bond was also flat at 3.201. Both remained close to multiyear highs reached last week.
The minutes are expected to reveal how the central bank is thinking about the strength of the economy, with many expecting that the Federal Open Market Committee will raise rates in June to stay ahead of creeping inflation.
This article was originally posted on FX Empire
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