By William L. Watts, MarketWatch
FRANKFURT (MarketWatch)—The dollar posted modest gains versus the euro and the Japanese yen Friday, adding to gains inspired by the week’s sharp run-up in U.S. Treasury yields, as traders awaited the latest read on U.S. consumer inflation.
The ICE dollar index DXY +0.05% , which tracks the U.S. unit against a basket of major rivals, traded at 80.350, up from 80.158 in North American trade late Thursday. The index has rallied 0.4% in the week-to-date and is up nearly 2% since the beginning of March.
A rise in U.S. Treasury yields was accelerated after the statement from the Federal Reserve’s rate-setting Federal Open Market Committee on Tuesday was viewed as more upbeat, while U.S. economic data surprised to the upside.
Higher yields can boost a currency as investors seek bigger returns.
“Risk appetite continued to hold during the European session though there was a general sense of calm ahead of inflation figures due later in the U.S.,” said Geoffrey Yu, strategist at UBS.
Economists surveyed by MarketWatch forecast a 0.5% rise in the February consumer-price index after a 0.2% January increase. Core CPI, which strips out volatile food and energy prices, is expected to show a 0.2% increase, matching a January rise.
The euro EURUSD +0.06% fetched $1.3061, down from $1.3097 on Thursday. The dollar bought 83.75 Japanese yen USDJPY +0.43% , up from ÂĄ83.40.
The British pound GBPUSD +0.15% traded at $1.5729, up from $1.5672.
“With U.S. economic data improving and inflationary pressures starting to rise, [the Fed] may not be able to maintain its ultra-accommodative monetary policy for much longer. Today’s U.S. CPI data could prove to be the main catalyst for trade if it rises above the key 3% level on a year-over-year basis,” said Boris Schlossberg, director of currency research at GFT.
A move above 3% on the year-over-year measure could push U.S. 10-year yields toward the 3% level as well, he said, a move that would be “highly bullish” for the dollar and capable of sending dollar/yen to fresh yearly highs while potentially knocking the euro down below the $1.30 level.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
