Dollar holds gains as inflation fears boost yields

TOKYO: The dollar held gains on Thursday, supported by higher Treasury yields after a bigger-than-expected rise in U.S. consumer prices fanned fears about an increase in inflationary pressure.

Traders will now turn their attention to U.S. weekly jobless claims due later on Thursday and retail sales numbers on Friday to determine whether consumer prices will continue to rise.

The greenback is likely to continue to rise as some investors unwind bearish bets on the currency and reposition for more sustained inflation as more countries leave behind the coronavirus pandemic, analysts said.

"The move in the dollar was fuelled by the upward surprise in consumer prices, but also because the market was caught on the short side," said Shinichiro Kadota, foreign exchange strategist at Barclays.

"This market is aware of the potential for further upside surprises to inflation. This will support the dollar."

The dollar bought 109.55 yen, close to its strongest level in five weeks.

Against the euro, the dollar stood at US$1.2083, holding onto a 0.6per cent gain from the previous session.

The British pound bought US$1.4068.

The dollar also rose to 0.9083 Swiss franc, close to a one-week high.

U.S. consumer prices increased by the most in nearly 12 years in April as booming demand amid a reopening economy pushed against supply constraints, data on Wednesday showed.

Benchmark 10-year U.S. Treasury yields rose to a five-week high of 1.7040per cent, which increases the appeal of holding dollar-denominated assets.

Signs of stronger labour market and increased consumer spending would offer more evidence that inflationary pressure will pick up, which could push yields and the dollar even higher, traders said.

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Currency bid prices at 0053 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

US$1.2083 US$1.2071 +0.10per cent -1.10per cent +1.2084 +1.2070

Dollar/Yen

109.5500 109.7050 -0.14per cent +6.07per cent +109.7750 +109.5550

Euro/Yen

132.36 132.40 -0.03per cent +4.29per cent +132.5300 +132.3700

Dollar/Swiss

0.9083 0.9089 -0.06per cent +2.68per cent +0.9092 +0.9084

Sterling/Dollar

1.4068 1.4055 +0.11per cent +2.99per cent +1.4070 +1.4054

Dollar/Canadian

1.2113 1.2135 -0.16per cent -4.86per cent +1.2133 +1.2114

Aussie/Dollar

0.7732 0.7726 +0.10per cent +0.53per cent +0.7735 +0.7718

NZ

Dollar/Dollar 0.7171 0.7161 +0.16per cent -0.13per cent +0.7172 +0.7155

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Stanley White; Editing by Sam Holmes)