Major Concerns as USA 10-Year Yields Test 3%

Ann Santiago
April 27, 2018

The euro remains about 2-1/2 cents below highs touched only last week, after a bounce in U.S. Treasury yields fired up dollar-buying and encouraged some to question whether the euro's rally since past year had run out of steam.

MSCI's broadest index of Asia-Pacific shares outside Japan .miapj0000pus edged up 0.09 percent. Australia's S&P/ASX 200 climbed 0.7 percent to 5,924.60, and South Korea's Kospi lost 0.2 percent to 2,468.15. The Dow Jones industrial average fell less than 0.1 percent to 24,448.69.

The Dow .dji rose 0.25 percent overnight, ending a five-day losing streak, and the S&P 500 .spx gained 0.18 percent on optimism over a spate of upbeat earnings that managed to offset jitters over rising US bond yields.

Cole said euro/dollar was unlikely to budge much if the European Central Bank says little about ending its bond-buying, but that the euro is at risk in the coming months if the market begins to price in more USA rate hikes.

"With equity market sentiment holding firm in the face of rising bond yields, the almighty dollar could move through G-10 currency markets like a wrecking ball", Innes added. "But the Federal Reserve signalled in March that its rate hikes would be gradual", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

The benchmark United States 10-year Treasury yield breached 3 percent on Tuesday for the first time in more than four years and remained above that level on Wednesday as jitters about growing federal borrowing spurred selling of USA government bonds.

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The dollar index, which measures the greenback against a basket of currencies, was steady at 91.177 after rising to as much as 91.261 in the previous session, its highest since January 12. The greenback has risen without pause through much of the past week as concerns over a US-China trade dispute receded, allowing the market to turn its attention back to dollar-supportive fundamentals.

The ECB decision is due at 1145 GMT and president Mario Draghi will begin his press conference at 1230. The ECB is widely expected to keep policy unchanged but its comments will be followed closely for further guidance on the timing of its scaling-back of massive monetary stimulus.

It's the spike higher in U.S.

Market sources say rising crude oil prices are fueling speculation of higher inflation.

Spot silver dropped 0.2 per cent to $16.68 an ounce.

But higher yields on bonds make gold a less attractive investment because it pays no interest.


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