Dollar stronger amid higher U.S. yields on Fed’s lower-for-longer mantra

The safe-haven U.S. dollar held firmer on Friday, supported by higher Treasury yields and falling stock markets, as investors digested the Federal Reserve’s pushback against expectations of any early interest-rate hikes. The dollar index was slightly higher following a 0.5% jump from Thursday that was the most in two weeks. The benchmark U.S. 10-year yield climbed to a more than one-year peak of 1.754% overnight before easing to 1.706%, while Asian stocks followed Wall Street lower.

The yen dipped briefly after the Bank of Japan widened its target band for the benchmark yield in a decision that was in line with market expectations. The Federal Open Market Committee (FOMC) pledged this week to press on with aggressive monetary stimulus, saying a near-term spike in inflation would prove temporary amid their projections for the strongest U.S economic growth in nearly 40 years.

The greenback was flat at 108.895 yen, adding to small gains overnight. Following the BOJ’s decision to widen the target band for the 10-year Japanese government bond yield to 25 basis points around 0% from 20 basis points previously, the yen briefly weakened past 109 per dollar, before retracing all of that move. The euro was slightly weaker at $1.1915, extending Thursday’s 0.5% tumble. The British pound sank 0.1% to $1.3913 after weakening 0.3% a day earlier, as the Bank of England warned the outlook for Britain’s recovery remained unclear, dampening some speculation the bank would signal a more confident outlook.

Dollar stronger amid higher U.S. yields on Fed’s lower-for-longer mantra, Reuters, Mar 19