Dollar Pushes Higher as Yields Stabilize After 3-Year Auction

The dollar pushed higher in early European trading Wednesday, helped by the stabilization of U.S. Treasury yields following their drop from one-year highs.

At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 92.155, after falling back Tuesday from a 3 1/2-month high of 92.506.

EUR/USD fell 0.1% to 1.1881, after climbing from a 3-1/2-month low of $1.1835 on Tuesday, USD/JPY was up 0.3% at 108.83, GBP/USD fell 0.2% to 1.3871, while the risk-sensitive AUD/USD fell 0.3% to 0.7690.

The greenback has closely tracked a surge in Treasury yields in recent weeks, with higher yields boosting the currency’s appeal as well as shaking overall investor confidence, spurring demand for the safest assets.

The benchmark 10-year Treasury yield stabilized around 1.54% on Wednesday after a three-day drop from a one-year high of 1.6250%.

Helping this calming was the successful auction on Tuesday of $58 billion in U.S. three-year notes. Weak demand at an auction of seven-year notes in late February helped start the trend of higher yields.

Investors are now looking at Wednesday’s auction of $38 billion in 10-year notes to see if this can also be absorbed successfully. And there will be plenty more of these in the months to come with President Joe Biden’s $1.9 trillion fiscal package to be funded.

Also on Wednesday’s slate is the release of February U.S. inflation data, with CPI expected to rise 0.4% on the month, up 1.7% on the year.

Speaking of inflation, February inflation in Norway rose to 3.3%, while core inflation stood at 2.7 % on the year, higher than the country’s central bank predicted.

EUR/NOK traded up 0.2% at 10.0897, near at 12-month low, and USD/NOK traded up 0.3% at 8.4932, near a 2-year low.

“Core inflation is not most important for Norges Bank now, as developments in the real economy matter most,” said analysts at Nordea Bank, in a research note, but “overall, these figures pull in the direction of a slightly higher rate path in March.”

In China, USD/CNY inched up to 6.5073, with February’s CPI growing 0.6% month-on-month while contracting 0.2% year-on-year. February’s PPI grew 1.7% year-on-year.