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Dollar Follows T-Note Yields Higher

Barchart - Thu Sep 22, 2:53PM CDT
Dollars and Wallets - Pile of Money

The dollar index (DXY00) on Thursday rose +0.56%.  The dollar Thursday extended Wednesday’s advance up to a new 20-year high. The dollar had carry-over support from Wednesday when the Fed signaled it would maintain its aggressive rate hike stance.   Also, a jump in the 10-year T-note yield to a new 11-year high Thursday strengthened the dollar’s interest rate differentials.  The dollar fell back from its best levels Thursday after USD/JPY dropped to a 2-week low when Japan intervened in the forex market to support the yen.

U.S. economic news Thursday was mixed for the dollar.  On the positive side, weekly initial unemployment claims rose +5,000 to 213,000, showing a stronger labor market than expectations of 217,000. Conversely, Aug leading indicators fell -0.3% m/m, weaker than expectations of -0.1% m/m.

EUR/USD (^EURUSD) on Thursday fell slightly by -0.01% and posted a new 20-year low.  Dollar strength Thursday weighed on EUR/USD along with weaker-than-expected economic news after Eurozone consumer confidence in September fell more than expected to a record low.  However, the euro recovered most of its losses after hawkish ECB comments pushed the 10-year German bund yield up to a 9-year high of 1.996%, which is supportive for EUR/USD.

The Eurozone Sep consumer confidence indicator fell -3.8 to a record low of -28.8, weaker than expectations of -25.5.

ECB Executive Board member Schnabel said inflation in the Eurozone may not have peaked and that the ECB must push on with interest rate increases despite the souring outlook for the Eurozone economy.

USD/JPY (^USDJPY) on Thursday fell by -1.12%.  The yen recovered from a fresh 24-year low and rallied sharply to a 2-week high after Japan intervened in the foreign-exchange market to support the yen.  The yen initially fell to a 24-year low after the BOJ maintained its benchmark rate at a record low, and BOJ Governor Kuroda said there's no prospect for a near-term rate hike. However, the yen rallied after Japan intervened in the forex market, and Masato Kanda, Japan's top currency official, said "the government is concerned about excessive moves in the foreign exchange markets."

As expected, the BOJ, in a 9-0 decision Thursday, kept the policy balance rate at -0.1% and maintained its 10-year JGB yield target at about 0%.

BOJ Governor Kuroda said there is no need for the BOJ to change forward guidance for 2 or 3 years, and there is no prospect for a near-term rate hike.

October gold (GCV22) Thursday closed up +5.60 (+0.34%), and December silver (SIZ22) closed up +0.137 (+0.70%).  Gold and silver Thursday posted moderate gains.  Metals recovered from early losses Thursday and moved higher after the dollar fell back from its best levels when Japan intervened in the foreign exchange market in support of the yen.  Precious metals also have safe-haven support after Russian President Putin Wednesday ordered a “partial mobilization” of 300,000 Russian reservists as he ramps up his war in Ukraine.  Gold prices Thursday initially fell after the dollar index rallied to a 20-year high and after global bond yields rose.  Also, fund liquidation of gold is bearish for prices as long positions in gold ETF’s dropped to an 8-month low Wednesday.



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