US Dollar gains as investors watch for U.S. rate-clues from Yellen

Frankfurt (Nov 4)  The dollar rose against the euro and the yen on Wednesday, driven by higher U.S. Treasury yields which rose on expectations that the Federal Reserve will increase interest rates in December.

U.S. government bond yields rose to their highest levels in nearly seven weeks on Tuesday as investors have been lightening up on their bond holdings following the Fed’s signal a week ago that a rate increase before the end of this year remains on the table.

The benchmark 10-year U.S. government bond yield TMUBMUSD10Y, -0.49%  rose to 2.219% on Tuesday in New York, its highest closing level since Sept. 16.

Some market participants said year-end demand for dollar may also be helping the U.S. currency.

Meanwhile, the euro has been weighed on by the prospect of more easing by European Central Bank.

ECB President Mario Draghi on Tuesday defended the central bank’s readiness to take more accommodative action. The euro has weakened in the past few sessions after he hinted more easing in late October.

“This is a trading environment created by central banks,” said Toshihiko Sakai, senior manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking.

The euro EURUSD, -0.2645%   fell to $1.0917 from $1.0963 late Tuesday in New York. The dollar EURJPY, -0.13%  rose to ¥121.27 yen from ¥121.05.

The ICE dollar index DXY, +0.19%  rose 0.3% to 97.408.

The market’s immediate focus is on Fed Chairwoman Janet Yellen’s testimony before a U.S. House committee as investors look to her stance on monetary policy going forward.

Source: MarketWatch