US dollar closes in on decade-old peak as bond yields soar

The US dollar index vaulted above its January peak to hit 100.22 on Tuesday (Nov 15), its highest level since early December 2015.
The US dollar index vaulted above its January peak to hit 100.22 on Tuesday (Nov 15), its highest level since early December 2015.PHOTO: BLOOMBERG NEWS

TOKYO (REUTERS) - The US dollar is closing in on a test of its highest level in almost 14 years as bond yields soared after Mr Donald Trump's election as president, bringing buyers back to the US currency.

The dollar index vaulted above its January peak to hit 100.22 on Tuesday (Nov 15), its highest level since early December last year.

It is coming within reach of its December 2015 peak of 100.51, and a rise above that would take it to its highest level since 2003.

Since Mr Trump won the US presidential election last week, the 10-year US bond yield has jumped about 0.40 percentage point to 10-month highs as his policies of major fiscal spending and trade protectionism are seen as likely to stoke inflation.

"Everyone knows that there are questions over how much of his campaign promises Trump can actually deliver. There could be friction between the White House and the Congress down the road," said Mr Kazushige Kaida, head of forex at State Street. "But market players are not political scientists. For now, they have decided to jump on this euphoria," he added.

The dollar rose to 108.545 yen before easing 0.5 per cent in Asia to 107.86 yen. The US currency is still up 6.7 per cent from a low touched last Wednesday.

"Given the massive increase in US bond yields, the dollar is within sight of testing 110 yen," said Mr Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ. "Even though US bond yields rose sharply, US stock prices were firm. As long as the US share markets are supported, I suspect the dollar's appreciation will continue," he added.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat in early trades.

Japan's Topix index advanced 0.1 per cent as Mitsubishi UFJ Financial Group jumped after earnings beat estimates. Australia's S&P/ASX 200 Index slipped 0.7 per cent and South Korea's Kospi index was little changed.