Tom Westbrook and Greta Rosen Fondern
SINGAPORE/GDANSK (Reuters) – The dollar rose for a second straight day on Wednesday, but bond yields soared on positive U.S. data and bets on a U.S. Federal Reserve rate cut. As a result, other major currencies slumped near their lowest levels in months.
Tuesday's data showed the number of U.S. job openings unexpectedly increased in November, with fewer layoffs, while a separate survey showed activity in the U.S. services sector accelerated in December, with input prices rising The index has reached a two-year high, which could be a warning of inflation.
Bond markets responded, with the 10-year Treasury yield rising more than 8 basis points to an eight-month high of 4.699%.
“We're seeing some very strong U.S. data and rates will go up,” said Bart Wakabayashi, head of State Street's Tokyo office. said.
“There's even a debate about whether to cut rates or raise rates. The story has changed quite a bit.”
Markets are currently pricing in just 38 basis points of Fed easing this year, with the first rate cut coming in July.
For further clues on the expected path of US interest rates, attention will be paid to the US private sector payroll statistics to be released in the second half.
Traders are nervous ahead of Friday's key U.S. labor data and President Donald Trump's inauguration on Jan. 20. His second term as president is expected to begin with a series of policy announcements and executive orders.
The dollar fell on Monday after a report in the Washington Post that President Trump's aides are considering a plan to apply trade tariffs only to areas deemed critical to U.S. national security.
However, the currency gained some ground after President Trump denied the report in a post on his Truth Social platform.
The dollar index rose 0.15% on Wednesday to 108.86, chasing last week's two-year high of 109.58.
Other currencies also struggled.
Overnight, the yen hit a six-month low of 158.42 yen, approaching the 160 yen level that prompted intervention last year. The final score was 158.130.
Japan's consumer sentiment worsened in December, a government survey showed, casting doubt on the central bank's view that strong household spending supported the economy and justified higher interest rates.
Data on Tuesday showed inflation rose in the euro zone in December, but markets are still pricing in 100 basis points of easing from the European Central Bank this year.
The euro fell 0.16% on the day to trade around $1.0323 after hitting a two-year low of $1.0224 last week.
