USD Exchange Rate Holds Firm as Inflation Drives Up Yields

On Monday, the USD exchange rate found a footing against its major peers as the Chinese economy slowed down, propelling Treasury yields up. 

The US dollar index, which trails the greenback against a basket of its six rival currencies, strengthened 0.20% to $94.13.

Accordingly, the safe-haven currency reversed its consecutive lows last week. 

Moreover, US treasury yields firmed as investors bets that inflation would drive interest rates higher.

Subsequently, the 5-year yields improved 0.05 points to 1.17%, the highest level since February last year. 

Then, the bonds in the 10-year Treasury rose 0.03 points to the $1.61% level, extending its uptrend in recent weeks. 

Consequently, the soft Chinese figures also prompted expectations of the earlier tightening of global monetary policy. 

In addition, it turned traders broadly cautious as they brace for a bumpy period amid the power crunch, benefiting the greenback. 

On the economic data front, China’s gross domestic product plummeted to 4.90% year-over-year from the previous rate of 7.90%. It also came in lower than the market expectation of 5.20%. 

Similarly, its industrial production lowered to 3.10% year-over-year from September’s figure of 5.30%. In addition, it is far from the forecasted 4.50%.

Furthermore, the fixed asset investment also dropped to 7.30% from 8.90%. 

Generally, this report pushed the USD exchange rate, while the yuan declined 0.04% to $6.43. 

Similarly, the NZD to USD exchange rate slashed 0.11% to $0.71, opposing its subsequent gains. 

The move came after New Zealand’s Consumer price index elevated to 2.20% from the prior data of 1.30%. 

Moreover, analysts forecasted that its central bank would stay on its current course on a hiking trajectory. 

JPY to USD Exchange Rate Edged Up

Meanwhile, the yen improved 0.13% to $114.37, following its previous gains. 

Then, investors looked forward to the release of the Japanese trade balance tomorrow. 

Accordingly, the forecasted data widened to $-4.54 billion from the last number of $-5.57 billion. A significant miss from the projection could weigh down the local currency. 

At the same time, the Swiss franc edged up 0.46% to $0.93 as the Canadian dollar escalated 0.24% to $1.24. 

Conversely, the GBP to USD exchange rate lost 0.20% to $1.37. The hawkish remarks of Bank of England Governor Andrew Bailey last weekend pulled down the Pound sterling. 

Similarly, the euro fell 0.19% to $1.16 as the Australian dollar weakened 0.51% to $0.74.