DOLLAR CLIMBS TO NEW SIX-YEAR HIGH VS YEN, AUSSIE SLUMPS
Sept 15 2014, 10.50 am GMT
(Reuters) - The dollar rose to a new six-year high against the yen on Wednesday, as the Australian dollar nursed a second session of heavy losses after further gains in U.S. Treasury yields.
Investors seemed to be repricing the risk of an earlier U.S. interest rate hike after some determined that a Federal Reserve study earlier this week could suggest markets were underestimating such a move.
U.S. Treasury yields have moved up as a result, with the two-year US2YT=RR within sight of a three-year peak of 0.590 percent set in late July. The 10-year yield US10YT=RR popped back above 2.50 percent, off a recent low of 2.30 percent, and was at 2.505 percent in Asian trade on Wednesday.
The rise in U.S. yields helped the greenback hit a fresh six-year high of 106.56 yen JPY= on the EBS trading platform. It also firm against many emerging markets currencies. [EMRG/FRX]
"People missed their chance to buy the dollar on dips," said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.
"The interest rate outlook is in focus, as Japanese yields will keep to lower levels," he said.
Standing out from the other major currencies, the Australian dollar skidded 0.4 percent to $0.9162 AUD=D4, after dropping as low as $0.9154 as a pick-up in market volatility pushed investors to pare back carry trades, in which they borrowed lower-yielding currencies to fund investments in higher-yielding assets.
The Aussie's setback was sparked by a broad rally in the U.S. dollar.
The euro, meanwhile, edged down against the greenback, moving back toward a 14-month trough of $1.2859 EUR= plumbed in European trade on Tuesday. It last traded at $1.2925 EUR=, down about 0.1 percent on the day.
Sterling also got some reprieve despite ongoing worries about Scottish independence. It added about 0.1 percent to$1.6115 GBP=D4, having carved out a fresh 10-month low of $1.6060 on Tuesday.
The dollar index .DXY edged down slightly to 84.234 from Tuesday's 14-month high of 84.519. But it is still within striking distance of its 2013 peak of 84.753, and a break of that level would take it to highs not seen since mid-2010.
Looking ahead, a policy review by New Zealand's central bank, employment data from Australia and China's inflation figures will take centre stage on Thursday.
(Additional reporting by Cecile Lefort in Sydney; Editing by Richard Pullin and Jacqueline Wong)
Trading in CFDs involves significant risk to your invested capital
WARNING FOR HIGH RISK INVESTMENTS:
Trading in CFDs is highly speculative; it carries a high risk and is not suitable for all investors. There is a possibility that you may lose part or all of your return on capital and you should therefore not speculate with a capital that you cannot afford to lose. CFDs or any other underlying instruments (Company’s Assets) confer a high degree of risk and can lead to a loss of your invested capital. Please click here to read the full warning on risks incurred.
STOCK.com is a trading name of Leadcapital Markets Ltd, an investment company authorized and regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license number 227/14. Leadcapital Markets Ltd is located at Treppides Tower, 9 Kafkasou Street, Aglantzia,5th Floor, CY 2112, Nicosia, Cyprus