Title: Dollar Edges Higher as Yields Rise; Euro Receives Macron Boost

Apr 11, 2022 02:56AM ET

By: AnalysisWatch

The U.S. dollar edged higher in early European trading on Monday, supported by continued strength in U.S. bond yields, while the euro was helped by incumbent Emmanuel Macron's lead after the first round of the French presidential election.

At 2:55 AM ET, the U.S. dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 99.987, continuing to show strength after gaining about 1% last week.

The dollar benefited from the aggressive stance of the U.S. Federal Reserve, which raised interest rates by 25 basis points at its March meeting and is likely to raise them further later this year.

St. Louis Fed President James Bullard, who has sided with the hawks in the debate, said late last week that the central bank would need to raise the benchmark rate another 3 percentage points by the end of the year.

The benchmark 10-year bond yield rose again on Monday, adding seven basis points to its high of 2.77% as traders prepared for the change.

The USD/JPY rose 0.8% to 125.36, with the yen suffering from the Bank of Japan's keeping yields near zero, in direct contrast to the Fed's stance.

On the other hand, EUR/USD rose to 1.0880, supported by the results of the first round of the French presidential election, in which incumbent Emmanuel Macron received the most votes.

GBP/USD fell 0.3% to 1.2993 after the UK economy's growth slowed more than expected in February, with GDP rising 0.1% after growing 0.8% in January.

As iron ore prices fell, AUD/USD fell 0.4% to 0.7429, a three-week low, while USD/CNY rose 0.1% to 6.3727 after China's producer price index rose 8.3% y/y, with the world's second-largest economy struggling to cope with inflationary pressures stemming from Russia's incursion into Ukraine and the recent COVID-19 outbreak.