Dollar Gains as Treasuries Slide on Rates Speculation

Tokyo (July 7)  The dollar strengthened against major peers and Treasuries fell amid speculation a stronger U.S. labor market means the Federal Reserve may raise rates sooner. Asia’s benchmark equity gauge traded near a six-year high and oil fell with gold.

The dollar gained 0.2 percent against the Australian and New Zealand currencies by 10:01 a.m. in Tokyo, while the Bloomberg Dollar Spot Index was higher for a fourth day. The yield on 10-year Treasuries climbed two basis points. MSCI Asia Pacific Index (MXAP) was little changed at 147.58. Futures on the Standard & Poor’s 500 Index were little changed and gold dropped 0.2 percent. West Texas Intermediate crude oil traded near a one-month low.

Goldman Sachs Group Inc. brought forward its estimate for U.S. interest rate increases to the third quarter of 2015, saying the U.S. economy is “accelerating to an above-trend pace.” The Fed releases minutes of its last Open Market Committee meeting this week, while American markets resume today from a three-day weekend after stronger-than-forecast jobs reports on July 3. China releases inflation and trade data this week, while companies including Fast Retailing Co. and Samsung Electronics Co. are due to report earnings.

“What the market’s looking for is an indication that the FOMC debate is maybe getting a little bit more lively,” said Sam Tuck, an Auckland-based senior currency strategist at ANZ Bank New Zealand Ltd. “Should we see that, obviously we’d expect the U.S. dollar to start strengthening a little bit more.”

International Monetary Fund Managing Director Christine Lagarde signaled a cut in the institution’s global expansion forecasts, saying investment is still weak and that risks remain in the U.S. even as its rebound accelerates.

Dollar Rises

The dollar reached a one-week high versus the euro and was stronger against 13 of 16 major peers. The U.S. currency was at $1.3582 per euro, the strongest since June 26.

The Aussie weakened 0.2 percent to 93.46 U.S. cents, after sliding 0.7 percent in the five days ended July 4. Investors are underestimating the probability of a “significant fall” in the Australian dollar at some point, central bank Governor Glenn Stevens said in a July 3 speech. The kiwi slipped to 87.2 U.S. cents.

Asian shares last week posted an eighth weekly gain, the longest winning streak since 2012, as Japan’s Topix index climbed to a five-month high. In the U.S., the S&P 500 and the Dow Jones Industrial Average both rose 1.3 percent in a shortened trading week to close at all-time highs.

WTI fell as much as 36 cents, or 0.4 percent, from its July 3 close. Brent crude traded at $110.58 a barrel, after touching the lowest in more than three weeks, as Libya prepares to resume exports and amid speculation that Iraq’s crude production remains unaffected by violence. Natural gas futures retreated 1.9 percent.

Gold traded at $1,317.74 an ounce, while silver for immediate delivery decreased 0.3 percent to $21.1007.

Source:  Bloomberg