Title: Dollar Edges Higher; Powell Adds to Sharp Rate Hike Expectations

Apr 22, 2022 03:07AM ET

By: AnalysisWatch

The US dollar edged higher in early European trade on Friday, helped by rising US bond yields as Fed Chairman Jerome Powell raised expectations of aggressive Federal Reserve monetary tightening.

At 3:05 a.m., the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1 percent higher at 100.760, not far from the two-year high of 101.03 it hit earlier in the week.

Although his comments were broadly in line with market expectations, the US 10-year government bond yield climbed to 2.974%, its highest level since December 2018.

This dollar strength is being played out against the Japanese yen and Chinese yuan in particular, with Japan's central bank maintaining its highly accommodative stance and China's economy hit by slowing demand abroad and strict bans at home.

The USD/JPY pair traded 0.4% lower at 127.92, with the yen supported on Friday by reports that Finance Minister Shunichi Suzuki discussed the idea of coordinated currency intervention with US Treasury Secretary Janet Yellen earlier this week.

Nevertheless, the currency pair is still up well over 1% this month, having hit a two-decade high of 129.43 earlier this week.

USD/CNY rose 0.3% to 6.4687, hitting a seven-month high amid fears that the extended COVID-19 freezes will severely curtail economic activity in the world's second-largest economy.

Meanwhile, EUR/USD fell 0.1% to 1.0829, not far above a two-year low, on jitters ahead of the French presidential election set for Sunday, while AUD/USD fell 0.8% to 0.7313, a five-week low.

GBP/USD fell 0.5% to 1.2967, weighed down by UK retail sales, which fell 1.4% in March from the previous month, the third decline in the last four months, as the cost-of-living crisis continues to weigh on consumer confidence.