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American Focus: US Dollar Gains Against Majors – 18 March 2021

The US dollar gained on Thursday as higher Treasury yields helped it offset nearly all of the losses it suffered in the previous session after the Federal Reserve cleared up speculation over interest rate hikes.

The Federal Reserve said Wednesday that the US economy is heading for its strongest growth in nearly 40 years. At the same time, central bank policymakers have pledged to maintain current policies despite the expected surge in inflation. While inflation is expected to jump to 2.4% this year, above the central bank’s 2% target, Fed Chairman Jerome Powell said it was seen as a temporary spike that would not change the Fed’s promise to keep its benchmark interest rate. the rate is about zero.

“The dollar reacted as expected as reflationary trading resumed shortly after the press conference,” said Brad Bechtel, a Jefferies expert.

“Today, the dollar has compensated for some of these losses,” Bechtel said.

Following the Fed’s announcement, the yield on 10-year bonds fell from a 13-month high of 1.69% earlier Wednesday. But on Thursday, 10-year bond yields resumed their recent rally, at one point surpassing 1.75% and hitting a 14-month high.

The US dollar edged up slightly after data on Thursday showed that the number of Americans filing new jobless claims rose unexpectedly last week.

The yen fell 0.15% against the US dollar amid a Nikkei report that said the Bank of Japan is expected to slightly widen the implicit range in which it allows long-term interest rates to move around a 0% target.

The pound slipped against the dollar as the Bank of England warned that the outlook for a UK recovery remained unclear, dampening some speculation that the Bank would signal a stronger outlook.

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