Forex – Dollar Eases, Remains Close to 5-Month Highs

© Reuters. Dollar eases, remains close to 5-month highs – The U.S. dollar eased but remained close to five-month highs against a currency basket on Wednesday after a surge in U.S. government bond yields gave fresh impetus to a dollar rally that had lost momentum last week.

The , which measures the greenback’s strength against a basket of six major currencies, dipped 0.11% to 93.05 by 03:45 AM ET (07:45 AM GMT), within close reach of Wednesday’s five month peaks of 93.35.

The dollar jumped higher on Tuesday after a indicated that consumer spending is on track to rebound after a soft patch in the first quarter, boosting expectations for continued economic growth.

The dollar was also boosted by the surge in U.S. Treasury yields following the report, as traders continued to price in a faster pace of rate hikes by the Federal Reserve this year.

The yield on rose as high as 3.095%, the highest level since August 2011. Bond yields move inversely to prices. The yield subsequently came off that level and was last at 3.067%.

Yields have climbing higher since the Fed said on at its May meeting that inflation is moving closer to its 2% target. The Fed raised rates in March and projected two more rate hikes this year, although many investors see three hikes as possible.

The dollar slipped lower against the yen, with losing 0.15% to trade at 110.14 after hitting 110.45 on Tuesday; the most since February 2.

The yen showed little reaction to news that by a larger than forecast 0.6% in the first quarter, amid declines in investment and consumption and weaker export growth.

The euro was a touch higher, with edging up 0.13% to 1.1853, having fallen to 1.1815 overnight, its weakest since December 22.

The pound was almost unchanged for the day, with last at 1.3506 after hitting a five-month low of 1.3450 on Tuesday.

The Australian dollar pushed higher, with rising 0.23% to 0.7489 after ending the previous day down 0.77%.

The New Zealand dollar also gained ground, with climbing 0.39% to 0.6886 after reaching a five-month low of 0.6849 overnight.

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