© Reuters. FILE PHOTO: U.S. dollar notes to see the figure in this image
By Saikat Chatterjee
LONDON (Reuters) — The dollar gained for the fourth consecutive day on Thursday, as a rise in US Treasury yields encouraged investors to reduce their short bets, although markets grew more cautious chasing him higher, as the currency approached the top of the recent trading ranges.
The dollar climbed to a one-month high against a basket of currencies (DXY) and is on the way to the best weekly performance this year on hopes that US President Donald Trump may be the management will make progress on tax reform.
«We are in the correction mode on the dollar, because it has really changed anything fundamental for the U.S. outlook, and the ambitious tax plan a lot of details missing,» said Viraj Patel, a FX strategist at ING Bank in London.
The dollar was trading 0.24% higher against a basket of currencies (DXY). It is 2.5 per cent won, since hitting a 2 1/2-year low of 91.35 in mid-September.
To lower Trump on Wednesday, the largest U.S. tax overhaul in three decades, the taxes proposed for the majority of Americans, but also prompt the criticism that the plan favours the wealthy and corporations, and the U.S. could expand the budget deficit.
The proposal faces an uphill battle in the US Congress, with trump’s own Republican party is split and the Democrats are hostile.
But the unveiling of the plan, together with the last radical rhetoric from the US Central Bank, has increased the likelihood of a US interest rate hike from December to 70 percent, compared with less than a third a month earlier. The speculators began to bet on relax short-dollar, the swollen were to multi-year highs.
«This is likely to increase the best time for US interest rates than short-term growth indicators look robust, and the volatility is close to record lows and financial markets healthy and in the vicinity of record highs,» said Yassir Benjelloun Touimi, portfolio manager at Dalton Strategic Partnership LLP in London.
The U.S. 10-year Treasury yield (US10YT=RR) rose to 2.3590 percent, the highest level since mid-July, and was founded shortly before the upper end of the trading range since the beginning of may.
Including the current movement of the US 10-year yield has risen more than 12 basis points — to set it on course for its biggest two-day rise of more than seven months.
The dollar’s gains were pronounced against the currencies in which the local history has in the last few days, as the euro and the Japanese yen
Japanese Prime Minister Shinzo Abe called early elections as the main opposition party, the democratic party threw its support behind a young party, led by Tokyo’s popular Governor, Yuriko Koike, Oct. 22 votes. The euro elections this week after the unexpected exit of the Germans.
Morgan Stanley strategists said in a daily note: a change of leadership in Japan could have an impact on the domestic risk appetite and the yen.