US dollar gathers momentum as yields continue to rise

Yesterday’s reversal higher in Treasury yields helped to lift the dollar but not as much as I would have expected. With a further 7 bps in US 10-year yields today, the climb has been too much to ignore.

The US dollar is at the highs of the day across the board, including a one-month high in USD/JPY — up 32 pips to 157.52.

Yields began the climb yesterday after poor auction results in 2-year and 5-year notes. There is a 7-year sale today that will be closely scrutinized.

In the big picture, Treasury yields are now above where they were before the most-recent CPI report in a sign that the market isn’t convinced that the inflation story is done, or is worried about unsustainable US deficits.

This article was written by Adam Button at www.forexlive.com.