By: Barbara Zigah
A rise in yields on U.S. treasury instruments helped to boost the U.S. Dollar in Asian trading today. Yesterday, against the Japanese Yen, the greenback gained nearly 1%, the largest single day’s advance against the Japanese currency in almost 3 months, and today gained .4% to trade at 83.84 Yen.
Market players commented that if the yield spreads between the U.S. and Japanese bonds continues to widen, they will likely support the U.S. currency over the Yen. The greenback also gained against the Euro and Australian Dollar, trading against the common currency at $1.3214, a gain of .3%, and against the Aussie at $0.9793, also a .3% gain.
Several economists have commented that the Obama administration’s extension of certain U.S. tax cuts likely fueled the higher bond spreads, leading to higher demand for the currency. One strategist noted that the markets seem to be encouraged, believing that 2011 is looking more positive for the U.S. than it has, as the tax cut extensions will reduce the burden on the Federal Reserve’s QE program. The U.S. Dollar Index traded at 80.238 .DXY, a .5% gain and above the 100-day moving average; the Index gauges the greenback’s strength versus other major currencies.