Increase in US Yields Before ECB Causes Dollar Rise

Increase in US Yields Before ECB Causes Dollar Rise

Tuesday makes it the second straight day for the US dollar to see a rise in prices. The greenback slowly drifted from its one month decline as the US Treasury yield provoked investors to cut short dollar positions against the Euro. They had the hope to do this before the upcoming European Central Bank meeting.

On Friday, the US dollar fell to its lowest since early August. This was caused by the shocking US payrolls report which was lower than expected. This lower than expected report caused analysts to place bets on the FEDs to deter from unwinding its stimulus plans in the coming months.

Dollar Gains

Against all rivals, in the last two sessions, the dollar has seen an increase as it rose by 0.21% to 92.39. This was after reaching its lowest level on Friday. According to Shaun Osborne, it seems like after the sell-off the dollar might have established a short term base at least. 

He continued stating that the FEDs are likely to move towards tapering by the year ending. To him, the US economy is likely to perform strongly and so the minor dollar dips are buying opportunities. Net long bets in the greenback have grown in the last week as it ends at $10.98 billion for the week. This is the largest net long position since March 2020.

Rising US Yields

Following the increasing US yield, the dollar gained from it. The government is due to sell $129 billion in new supply this week as well as $58 billion in three-year notes, $38 billion in 10-year notes and $24 billion in thirty-year bonds.

This increase in the US Treasury yield has assisted the filler index in regaining its losses after the poor NFP. The US 10 year yield of around 1.299% before the Friday release is now at 1.378% which is its highest since August 12. For Euro, it stays at $1.1856, which is lower than its peak of $1.1909.

European Central Bank

The European Central Bank has been deliberating on a cut in stimulus following its meeting on Thursday. Analysts hoped to buy under the  Pandemic Emergency Purchase Program (PEPP) provided by the ECB. As it falls as low as 60 billion Euros per month from the existing 80 billion.

After sticking with the Reserve Bank of Australia’s schemes to buy its bonds, the Australian dollar declined. Also, after the British government set out a plan to raise taxes, the pound dropped. On crypto, there is also a decline as bitcoin declines by 4% and either falls by 5%.