The dollar held firm on Tuesday in the wake of a rise in US bond yields and as the euro came under renewed pressure on persistent worries that Greece may miss debt repayments next month. The dollar last traded at 94.205 versus a basket of six major currencies, having touched a high of 94.336 at one point during the session, its highest level in nearly a week.
The dollar index had gained about one percent on Monday to pull away from a four-month low of 93.133 hit last Thursday.
The main catalyst for the dollar's rebound was a rise in US debt yields. The 10-year US Treasuries yield held steady at 2.228 percent, after rising 9 basis points on Monday.
US debt yields had risen in overnight trade despite weak US housing data, which showed sentiment among US homebuilders slipped in May even as economists had forecast a small improvement.
However, there was still some caution about the near-term outlook for the dollar, given the recent run of disappointing US economic data.
"To give it more legs you do need to see some real evidence that the growth trajectory into the second quarter has gained momentum," said Mitul Kotecha, head of Asia-Pacific FX strategy for Barclays in Singapore.
The euro slipped 0.1 percent to $1.1303, edging away from a three-month high of $1.1468 set on Friday. Renewed concerns over Greece's ability to repay its debts weighed on the common currency.
Investors dumped Greek bonds on Monday as Athens and its creditors made slow progress in bridging gaps on a range of issues.
In a leaked internal memo, first disclosed by Britain's Channel 4 on Saturday, the International Monetary Fund acknowledged Greece had little chance of making a payment due on June 5 and said it would not be pushed into a "quick and dirty" review to disburse further bailout funds to Athens.
Still, the common currency could rise further as many investors are stuck with euro short positions, said Junya Tanase, chief FX strategist at J. P Morgan Chase Bank in Tokyo.
"There still remains a massive amount of euro short positions. The euro also looked undervalued in terms of yield gaps between the euro and the dollar. The euro could be bought back and the dollar's rebound may prove to be a temporary one," he said.
Against the yen, the dollar held steady at 119.95 yen, having pulled up from last week's low of 118.885.
The New Zealand dollar rose 0.5 percent to $0.7426 after a central bank survey showed a pick-up in inflation expectations, cooling some speculation of a possible cut in interest rates in coming months.
The kiwi's bounce helped the Australian dollar recoup losses suffered after the Reserve Bank of Australia signalled it was open to further interest rate cuts if needed. Australian dollar edged up 0.1 percent to $0.7995, having recovered from an intraday low of $0.7956.
Comments
Comments are closed.