The dollar continued to strengthen on Wednesday morning in Asia, nearing its four-month high after the U.S. 10-year bond yield hit 3.009 percent after hovering at 2.998 percent during yesterday’s Asian session. U.S. Treasury 10-year bond yields haven’t touched the 3 percent handle since January 2014. As reported by Reuters, the gap between U.S. and German 10-year government bond yields is now the widest it’s been in 29 years, and the gap between U.S. and Japanese yields is the widest it’s been in 11 years. The dollar index, which had hit an overnight high of 91.016, eased slightly to 90.93 .DXY as of 1:36 p.m. HK/SIN, maintaining yesterday’s gains.
Dollar bulls were inspired by data released on Tuesday showing that U.S. consumer confidence and new home sales were both stronger in April, a sign that economic growth is likely to continue in the coming months. Nevertheless, the rising bond yield dragged Wall Street lower on Tuesday as companies warned that higher yields could lead to higher costs.
The dollar was trading at 109.01 against the yen in Asia’s early afternoon, up 0.18 percent. The dollar was also up against the euro, trading at $1.2213.
Oil Prices Struggle
Oil prices dropped overnight after U.S. President Donald Trump announced on Tuesday that the U.S. could reach an agreement with France that would maintain the 2015 Iran nuclear deal. The potential for the U.S. to withdraw from the nuclear deal had kept traders worrying about global oil supply and had sent prices broadly higher in the past week. Brent crude futures were trading at $73.82 per barrel, down a modest 0.05 percent while U.S. WTI futures were down 01.8 percent to $67.58 per barrel. In addition to concern about the extension of the nuclear deal, the oil dips may have been prompted by profit taking after the commodity hit fresh highs on Tuesday. Still, Lukman Otunga, research analyst at FXTM, noted his concern about the sustainability of an oil rally. “With rising production from U.S. shale still a key market theme that continues to weigh on oil prices, it will be interesting to see how much oil appreciates before the bears enter the scene,” Otunga commented to Reuters on Wednesday.