US recap: Dollar rises for fifth day, yields steady

The dollar index rose for a fifth day, edging higher as equity markets turned mixed while oil rose to a new five-month high.

The US 10-year Treasury yield pared gains after posting a new 14-month high, and the yield curve steepened, in calmer markets following Friday’s US jobs report. Treasury markets will digest consumer inflation data and retail sales later this week.

A battered pound settled off its low amid short-covering as gilt prices steadied. Prime Minister Keir Starmer said Britain will keep to the fiscal rules set out in finance minister Rachel Reeves’ October budget. Further pound gains are seen limited until after speeches by BOE’s Breeden and Taylor the next two days and U.K. inflation data on Wednesday.

EUR/USD trimmed its losses after falling to a fresh 26-month low near its 21-day lower Bollinger. It’s expected to eventually find its way to parity as long as France-German yield spreads are widening and euro zone fundamentals remain bleak. An absence of countertrend buyers mutes advances, while option barriers are set at lower levels.

European Central Bank chief economist Philip Lane told an Austrian newspaper that the central bank can ease policy further this year but must find a middle ground.

The yen held broad gains amid wobbly share prices and as a speech (10:30 local time) and press conference by hawkish-leaning BoJ Deputy Governor Himino approaches. There is reporting that wage gains and higher import costs have raised BOJ’s recognition of inflationary pressures.

Treasury yields were down marginally to up 1 basis point as the curve steepened. The 2s-10s curve was up about 1 basis point to +38.8bps.

The S&P 500 slipped 0.2% as tech shares weakened

Oil rose over 2% to a 4-month high as sanctions on Russian oil may send India and China buying elsewhere.

Gold fell 1.2% as the dollar strengthened, while copper edged up 0.4% on signs of increased demand.

Heading toward the close: EUR/USD -0.34%, USD/JPY -0.14%, GBP/USD -0.19%, AUD/USD +0.28%, DXY +0.22%, EUR/JPY -0.45%, GBP/JPY -0.41%, AUD/JPY +0.12%.

(Editing by Terence Gabriel; Reporting by Robert Fullem)