Dollar advances as Treasury yield threatens to climb above 3%

Bloomberg

The dollar rallied at the start of a week packed with catalysts, from economic data to new debt supply, as the yield on benchmark US Treasuries threatened to climb above 3 percent. Equities in the US fluctuated.
The greenback strengthened against major peers as the yield on the US 10-year note hit 2.99 percent for the first time since 2014 before paring the increase. The pound joined major currencies retreating against the dollar as UK Prime Minister Theresa May battled to avert a cabinet revolt over Brexit. Aluminum prices plunged after the US softened its position on sanctions against Russia’s United Co. Rusal.
“The entire market is watching that rates move and if we manage to break and extend higher the dollar will follow,” wrote Brad Bechtel, global head of FX at Jefferies, in a note on Monday. “If we fail and resume lower again the dollar will likely follow that too.”
The 60-day correlation between the Bloomberg Dollar Spot Index and benchmark Treasury 10-year yields has turned positive again, after dipping into negative territory during the
past few months for the first time since 2016.
Elsewhere, aluminum plunged as much as 9.4 percent after the US Treasury said it would provide sanctions relief to Rusal if Oleg Deripaska relinquished control, according to a statement. It also extended the deadline for companies to wind down dealings with the Russian aluminum producer by almost five months.
West Texas oil dropped after rising for a second week on a commitment from OPEC to rebalance the market. Gold declined.
French President Emmanuel Macron was expected to begin a three-day visit to the US on Monday. US GDP and jobless claims. Earnings season continues. Among those reporting: Alphabet/Google, Amazon.com, Samsung and Credit Suisse. The European Central Bank has a rate decision on Thursday. Investors will watch for any sign that officials are preparing a shift in stimulus plans for their June meeting. Bank of Japan announces its latest policy decision on Friday and releases a quarterly outlook report.
The S&P 500 Index rose 0.1 in New York, while the Dow Jones Industrial Average was little changed and the Nasdaq Composite Index gained 0.2 percent. The Stoxx Europe 600 Index rose 0.2 percent and the MSCI Asia Pacific Index fell 0.7 percent. The UK’s FTSE 100 Index gained 0.4 percent. The MSCI Emerging Market Index dropped 1.1 percent, after touching the lowest in almost three weeks.
The Bloomberg Dollar Spot Index rose 0.6 percent, reaching the highest in almost 14 weeks on its fifth straight advance. The euro weakened 0.5 percent to $1.2237, dropping to the weakest in almost eight weeks. The British pound dropped 0.4 percent to $1.3948. The Japanese yen sank 0.7 percent to 108.44 per dollar, touching the weakest level in 10 weeks.
The yield on 10-year Treasuries rose two basis points to 2.98 percent, reaching the highest in more than four years. Germany’s 10-year yield increased four basis points to 0.63 percent, the highest in six weeks. Britain’s 10-year yield gained four basis points to 1.52 percent.
West Texas Intermediate crude slipped 0.8 percent to $67.59 a barrel, after posting the largest decline in a week. Gold dropped 0.9 percent to $1,323.36 an ounce, after reaching the least in more than three weeks.