Dollar falls as record Japanese bond auction lifts yen, pound surges on jobs data
Investing.com — The U.S. dollar slipped on Tuesday, as oil prices reversed course and eased some inflationary concerns. The greenback’s move was also largely due to a climb in the euro and the yen and a surge in the sterling.
At 14:30 ET (18:30 GMT), the U.S. dollar index, which tracks the world’s premier currency against a basket of six major peers, shed 0.3% to 101.71.
Oil prices turn lower
Global crude prices had initially risen on Tuesday, adding to general concerns that central banks would need to hike interest rates to deal with oil-linked price pressures. Stronger rate environments generally tend to strengthen the dollar.
But oil slipped into negative territory, with Brent crude futures, the global benchmark, last down 0.8% to $108.66 a barrel. The fall came after The New Arab reported that Qatar and Pakistan had offered a “middle ground” plan to the U.S. and Iran that met the demands of both sides, citing sources familiar with the mediation efforts.
The proposal offers around $6 billion in frozen Iranian funds in Qatari banks as a “partial response” to Tehran’s demands to unfreeze assets, The New Arab said. The proposal also includes Iran apparently agreeing to secret visits by the International Atomic Energy Agency to its nuclear sites, The New Arab added.
According to Thierry Wizman, global FX and rates strategist at Macquarie, central banks across the world were seeing a difference in terms of how much focus they give to oil prices.
“The past few days’ rise in crude oil prices seems to have reignited or cemented expectations for rate hikes at the (Bank of England) and (Bank of Canada), which are more removed from trends in the U.S. and the Euro area,” he said.
“That divergence between central banks that are focusing on energy prices (the BOE and BOC) and those that aren’t as much (the Fed, the ECB, the RBA) has already favored some currencies over others. The GBP has rallied strongly over the EUR during October, and EUR/GBP has dropped from 0.85 to 0.84 so far this month,” Wizman noted, referring to the European Central Bank and the Reserve Bank of Australia.
Record-breaking Japanese bond sale triggers yen surge
Turning to other major currencies, over in Asia, the Japanese yen firmed to 158.17 per dollar.
The move came after investors showed unprecedented demand for a 20-year Japanese government bond sale. The auction drew a record bid-to-cover ratio of 5.84 times the amount offered, as per Reuters – the highest bid ratio ever since the 20-year maturity was introduced in 1987.
