The dollar was driven higher against other major currencies in Asia on Wednesday morning as the yields on 10-year U.S. Treasuries topped 3%, increasing prospects of inflation. The yen and the Aussie were both weighed down by the yield-fueled greenback.
The U.S. dollar index that tracks the greenback against a basket of six major currencies last stood at 90.60, up 0.04% at 11:32PM ET (03:32 GMT).
As the U.S.-China trade conflict woes receded, global investors all eyed the rising United States 10-Year in recent days that surged to 3% on Tuesday, a new high since early 2014. The increase was driven by fears of rising inflation and speculations that the Federal Reserve will be more aggressive in raising interest rates in 2018.
The yield is a barometer for mortgage rates and other financial instruments. Higher yields could lead to higher mortgage and business loan interest rates, as well as reduced spending that would push stocks lower.
The USD/JPY pair gained 0.10% to 108.93. While a bearish equity market was often supportive for the anti-risk yen, the yen lost to the greenback that was sent higher by the yields. The spread between the 10-year US treasury yield and 10-year Japanese government bond yield also stood at 294 basis points, the widest since 2007.
The AUD/USD pair headed 0.17% lower to 0.7590. Although the Australian markets were closed for Anzac Memorial Day, the Aussie still slid against the greenback that was in a rally.
In China, The People’s Bank of China set the fix rate of yuan against the dollar at 6.3066 versus the previous day’s 6.3229. The USD/CNY pair eased 0.03% to trade at 6.3040.