Dollar ticks up as Treasury yields partly claw back fall

The dollar ticked higher on Monday as Treasury yields rose off last week’s 2-1/2-month lows following news that initial observations suggested those suffering from the Omicron Covid-19 strain only had mild symptoms.

The Omicron news from South Africa helped reverse some of the moves from Friday, when Wall Street had sold off heavily.

That selloff had taken 10-year Treasury yields below 1.4 per cent for the first time since late-September and boosted the safe-haven yen and Swiss franc.

The dollar had tumbled as much as 0.4 per cent lower against the Japanese currency.

Friday’s greenback losses also followed a below-forecast jobs report, though the data did little to shake market expectations the Federal Reserve will accelerate the pace of unwinding stimulus and raise interest rates starting next year.

The dollar index inched 0.10 per cent higher at 96.29, within range of November’s 16-month peak of 96.938. It was also 0.2 per cent higher against the yen at 113.05 yen and rebounded 0.4 per cent to the franc.

“The dollar is capitalising on the narrative of the Fed sticking to its plans for quicker tapering, which is what we had last week from (Fed Chair Jerome) Powell,” said ING Bank FX strategist Francesco Pesole.

Dollar long positions climbed for a second straight week to the highest since June 2019, according to data from the US CFTC, while bearish euro positions rose to stand at the highest since March 2020.

The euro slipped a quarter percent to the dollar.

Pesole said a further dollar long build-up was likely, given diverging policy expectations, especially against the euro.

Meanwhile, the Australian dollar was up 0.5 per cent to $0.7035, scraping itself off a 13-month low. The kiwi rose 0.1 per cent to $0.6750.