US dollar hoisted as bond yields rise on Trump bets

Investors see higher inflation on way

The dollar held near a 13.5- year high against a currency basket in Asian trading on Monday, as investors stuck with bets that President- elect Donald Trump’s administration would adopt expansionary fiscal policies that will lead to higher interest rises.

The dollar index, which tracks the greenback against a basket of six rivals, added 0.1 percent to 101.31, after adding more than 4 percent last week to mark its biggest weekly rise since March 2015. It notched a high of 101.48 on Friday, its highest since April 2003.

The dollar rose to 111.190 yen, its highest since early June. It was last up 0.2 percent at 111.09 as investors positioned ahead of US Thanksgiving holiday later in the week. Tokyo markets will also be shut for a public holiday on Wednesday.

Expectations that a Trump presidency will usher in higher inflation and lead to faster- than- expected Federal Reserve interest rate increases have helped power the US currency.

“The dollar- yen uptrend remains intact, but the pace of the rise could be slower,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo, who predicts the pair to trade within a range of 109.50- 112 over the course of this week.

“It’s very hard to sell the dollar against the yen, in the current situation, beyond a certain level,” he said.

The dollar surged as yields on Trea- suries of all maturities marked their largest two- week gains in more than five years as investors dumped US government debt after the US presidential election on November 8.

The yield on US benchmark 10- year Treasury notes rose to a one- year high of 2.364 percent on Friday.

It last stood at 2.342 percent on Monday, compared with its close of 2.337 percent in the US during the previous session.

“The market is buying the dollar and selling US Treasuries, and it seems this trend may continue because we don’t know the details of ‘ Trumponomics,’ and we will not have it until after the 20th of January next year,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

“Until then, investors need to follow the trend,” Yamamoto said. “We might see some correction ahead of Thanksgiving.”

Data from the Commodity Futures Trading Commission released on Friday showed that speculators trimmed their dollar bets in the week through November 15, as profit taking reduced net long positions after they had risen for seven consecutive weeks.

Japanese yen net longs, meanwhile, posted their lowest level since early June, the data showed, with the yen a casualty of the dollar’s strong rally.