Dollar Rises Against Major Counterparts As Bond Yields Surge

The U.S. dollar surged higher on Tuesday and bond yields rose amid concerns about the outlook for interest rates following the latest economic data.

Bond prices dropped this morning and eased further as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.2 basis points to 4.051%.

With the significant increase on the day, the ten-year yield ended the session at its highest closing level in five months.

A report released by the Labor Department earlier in the day showed job openings edged down 9.58 million in June from 9.62 million in May.

While job openings fell to their lowest level since April 2021, Matthew Martin, U.S. Economist at Oxford Economics, questioned whether they are decreasing fast enough for the Federal Reserve.

"Fed officials signaled they would remain data dependent in determining the path forward for monetary policy, and June's report likely doesn't offer a large amount of evidence of significant labor market cooling," Martin said.

"The Fed is likely to put more weight on July's employment report due out on Friday, but here too we only anticipate marginal cooling, with job gains estimated to have fallen to 205k from 209k the previous month," he added. "These would leave the risks of additional rate hikes tilted to the upside."

Meanwhile, a separate report released by the Institute for Supply Management showed U.S. manufacturing activity contracted for the ninth consecutive month in July.

The ISM said its manufacturing PMI crept up to 46.4 in July from 46.0 in June, but a reading below 50 continues to indicate contraction. Economists had expected the index to inch up to 46.8.

The Commerce Department also released a report showing construction spending rose by slightly less than expected in the month of June.

The dollar index climbed to 102.43 this morning, and despite dropping to 102.24, is up nearly 0.4% from the previous close.

Against the Euro, the dollar is up marginally at 1.0984, and against Pound Sterling it has firmed to 1.2774, gaining nearly 0.5%.

The dollar is up against the Japanese currency, fetching 143.34 yen a unit, compared to 142.27 yen on Monday.

Against the Aussie, the dollar has strengthened to 0.6615 from 0.6717, and is gaining against Swiss franc as well, at CHF0.8753. The dollar is up against the Loonie at C$1.3282 as oil prices fell amid uncertainty about the outlook for energy demand.

Forex News