- Rise in yields globally spark inflation fears
- Cryptocurrencies slide as risk appetite sours
- Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
The U.S. dollar held gains Thursday after rebounding overnight from three-year lows following a spike in U.S. bond yields.
The yen, which tends to weaken when U.S. yields rise, slid to a fresh six-month low versus the greenback.
Government bonds, and particularly U.S. Treasuries, have become the focal point of markets globally, which have aggressively moved to price in earlier monetary tightening than signalled by the Federal Reserve and its peers.
The yen's decline came even amid a sell-off in stocks, as the surge in yields fomented inflation worries. The yen and dollar are both traditional haven currencies.
Emerging-market and commodity-linked currencies retreated, with the Australian and Canadian dollars stepping back from three-year highs.
Cryptocurrencies also tumbled, with bitcoin sliding 5% overnight and ether dropping 9%.
"The fixed income rout is shifting into a more lethal phase for risky assets," after initially being interpreted as a "story of improving growth expectations," Westpac strategists wrote in a client note.
"It appears to be the case that bond markets are 'taking on' the central bankers' world view, and standing in front of the current momentum is unwise."
Bond yields have climbed this year on the outlook for massive fiscal stimulus amid continued ultra-easy monetary policy, led by the United States.
An acceleration in the pace of vaccinations globally has also bolstered what has become known as the reflation trade, referring to bets on an upswing in economic activity and prices.
In recent days though, a rise in inflation-adjusted bond yields has accelerated, indicating a growing belief that central banks may need to pare back ultra-loose policies, despite their dovish rhetoric.
The benchmark 10-year Treasury yield US10YT=RR spiked above 1.6% overnight for the first time in a year, after an auction of $62 billion of 7-year notes was met with weak demand.
The dollar index =USD edged up to 90.381, holding on to a 0.2% rise from Thursday, when it rebounded from losses of as much as 0.26% before the bond tender.
The greenback was little changed at 106.2 yen JPY=EBS after earlier touching 106.43 for the first time since September. It has strengthened 2.8% after the first back-to-back monthly increases since mid-2018, putting the yen among the worst performing major currencies this year.
The Australian dollar AUD=D4 continued its retreat after topping $0.80 on Thursday for the first time since February of 2018, declining 0.2% to 0.78525.
The Canadian dollar CAD=D4 weakened to C$1.2613 after falling from its own three-year top to the greenback at C$1.2468 overnight.
The euro EUR=EBS weakened 0.1% to $1.2158 after touching a seven-week high of $1.22435 on Thursday.
Bitcoin BTC=BTSP was slightly weaker Friday at $46,704, while ether ETH=BTSP slipped to $1,476.
======================================================== Currency bid prices at 110 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR=EBS $1.2156 $1.2175 -0.14% -0.49% +1.2185 +1.2137 Dollar/Yen JPY=D3 106.2270 106.2100 +0.02% +2.85% +106.4170 +106.1700 Euro/Yen EURJPY= 129.14 129.35 -0.16% +1.75% +129.5300 +128.9900 Dollar/Swiss CHF=EBS 0.9054 0.9051 +0.04% +2.35% +0.9066 +0.9049 Sterling/Dollar GBP=D3 1.3991 1.4009 -0.14% +2.39% +1.4024 +1.3950 Dollar/Canadian CAD=D3 1.2619 1.2605 +0.09% -0.93% +1.2647 +1.2598 Aussie/Dollar AUD=D3 0.7848 0.7870 -0.27% +2.03% +0.7882 +0.7823 NZ NZD=D3 0.7348 0.7370 -0.28% +2.34% +0.7380 +0.7310 Dollar/DollarAll spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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