SINGAPORE (Reuters) – The dollar was trading at a 3½-month basket on Thursday, helped by higher US Treasury yields led by the 10-year benchmark that broke the 3-percent barrier this week for the first time in four years.
The 10-year US Treasury yield US10YT = RR hit a new four-year high of 3.035 percent on Wednesday, driven by concerns over the growing supply of government bonds and bonds inflationary pressure from rising oil prices.
The recent rise in US bond yields has led to spreads between the US, Japan and the US and Germany continuing to expand in favor of the dollar, causing the yen and the euro to fall. In the Asian trade on Thursday, the 10-year Treasury yield last at 3.022 percent.
The Dollar's index against a basket of six major currencies was 91.181 .DXY, after rising to a high of 91.261 on Wednesday, was the strongest since Jan. 12.
The dollar index has risen more than 0.9 percent this week to get it on track for its biggest weekly gain in more than two months.
"If the US stock markets do not experience a very unlikely massive meltdown, it is doubtful that the Fed will fluctuate with a rate hike in June," wrote Stephen Innes, head of Asia-Pacific Oanda Singapore.
"With stock market sentiment set amid rising bond yields, the almighty dollar could sweep through the G-10 foreign exchange market like a wrecking ball," Innes added.
Wall Street hobbled into optimistic optimism over a wave of bullish gains on Wednesday, although it was nearly offset by the tense news of rising US bond yields and corporate costs.
The Euro rose 0.1% to € 1,2177 =, but was still in sight of a nearly two-month low of $ 1.2160 on Wednesday.
The single currency supports the technical charts at around $ 1,2155, a low on March 1st. A fall below this level would bring the euro to its lowest level since 12 January.
The short-term focus is on The European Central Bank's review of interest rates is expected on Thursday.
The ECB will leave its key interest rates unchanged on Thursday, easing worries over recent weakness in the eurozone economy and leaving the door open to ending its wasteful bond-buying program by the end of the year.
Against the yen, the dollar dropped 0.1 percent to JPY 109.38. On Thursday, the US currency reached a 2-1 / 2-month high of 109.49 yen.
The dollar jumped nearly 2.9 percent against the yen in April, beating its biggest monthly gain since November 2016.
Report by Masayuki Kitano; Cultivation of Shri Navaratnam