Dollar rises after strong manufacturing data and weak Treasury auction
The U.S. dollar held near a two-month high after a stronger-than-expected manufacturing purchasing managers' reading and a weak five-year Treasury auction prompted bond selling and higher yields, with five-year yields topping 5% for the first time since 2007. Fed Governor Michael Barr's comments reinforced expectations of further tightening and traders raised the odds of a Fed rate increase in October to about 70% on the CME FedWatch Tool. The dollar's strength pushed major FX pairs lower, nudged the yen after Tokyo signalled possible intervention, and coincided with oil price moves that amplified inflation concerns.
Five-year U.S. yields topped 5% and markets priced more Fed hikes.
Context
A strong U.S. purchasing managers' report and a weak Treasury auction moved markets. Traders raised chances of a Fed rate hike next month. That could keep yields and the dollar high.
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