Reuters: US Dollar Report: FOREX-Dollar riding higher with yields, NZD gets a lift

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FOREX-Dollar riding higher with yields, NZD gets a lift Aug 13th 2013, 23:55 Tue Aug 13, 2013 7:55pm EDT * USD firm after solid US data lifts Treasury yields * Yields differentials weigh more on yen than euro * NZ dollar perks up after very strong retail numbers By Wayne Cole SYDNEY, Aug 14 (Reuters) - The dollar was broadly firmer in Asia on Wednesday after racking up a third session of gains as upbeat U.S. retail data sent Treasury yields sharply higher and fuelled talk the Federal Reserve will start tapering next month. The rebound caught the market particularly short on dollar/yen and sent the currency rocketing to 98.25, a rise of over two yen from Monday's 95.92 trough. Resistance was put at 98.68, with support around 97.50/60. The euro slipped back to $1.3261, from a high of $1.3316 on Tuesday, though its losses were limited by a stronger reading of German investor sentiment. Traders reported stop-loss sell orders under $1.3230 and a break there could see a rewind to the $1.3155/85 zone. The euro also got a lift against the yen, reaching 130.30 from the week's low at 127.95. Against a basket of currencies, the dollar was up at 81.771 , having climbed 0.5 percent overnight. Driving the move was a robust 0.5 percent increase in U.S. core retail sales, the biggest gain since December. That led to a 9 basis-point jump in 10-year Treasury yields to 2.72 percent , so testing a huge chart level around 2.75 percent. A break there could ultimately unleash a move toward 3 percent. "It seems a Fed tapering is back on the menu and it's got yields moving again," said a trader at a local bank in Sydney. "It's noticeable that as yields steadied over the last couple of months, the dollar steadily declined. For a sustained rally, it needs yield differentials to keep widening." Getting such a widening was complicated by signs of economic recovery in Europe which had pushed up yields there as well. Yields on German 10-year bunds, for instance, surged around 10 basis points on Tuesday to keep pace with Treasuries. The dollar has a clearer advantage against they yen as Japanese bond yields are being held down by aggressive buying from the Bank of Japan. Among other currencies on the move on Wednesday was the New Zealand dollar, which popped higher after data on domestic retail sales blew past all expectations. The kiwi firmed to $0.7981, up from Tuesday's low at $0.7933. Sales volumes jumped 1.7 percent for the second quarter while core sales climbed by the most since 2006. The upbeat result underlined expectations that the Reserve Bank of New Zealand could be one of the first central bank in the developed world to actually start tightening policy. "Very strong number, when you look across the activity indicators, things are definitely travelling at a very brisk pace," said Ben Jarman, an economist at JPMorgan. "We do think the RBNZ must be holding a hiking bias, it's just a question of how long they can stay on hold for." Link this Share this Digg this Email Reprints

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