Dollar’s Post-FOMC Rally Loses Steam as Aussie Rallies on Jobs

  • RBC moots retreat to 115 yen, while Mizuho, Westpac eye 120
  • Bond yields climb across Asia in sympathy with Treasuries

The dollar lost some steam after earlier setting a fresh 21-month high versus the euro and a 10-month high against the yen. The Aussie extended gains following a report showing employers added more than twice the jobs analysts forecast.

Funds had earlier leapfrogged each other for dollars, helping the greenback extending an advance driven by the Federal Reserve’s increased projection for interest-rate hikes next year toward 118 yen. Mizuho Securities Co. and Westpac Banking Corp. see the potential for it to reach 120 yen this year. The euro recovered to around $1.05, where very large option strikes are clustered. Bond yields rose across Asia-Pacific after two-year Treasury yields jumped to the highest level since August 2009.

“The dollar has come a long way, very fast,” said Sue Trinh, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong. “It’s important to bear in mind that Yellen is at heart a dove, regardless of the dot plot.”

Trinh sees the dollar retreating as far as 115 yen and $1.06 per euro.

* USD/JPY around 117.50 after climbing as much as 0.7% to 117.86; RSI rises above 80, signaling overbought level
* EUR/USD down 0.3% to around 1.0506 after sliding as far as 1.0468, but failing to test March 2015 low of 1.0458
* AUD/USD trades up 0.2% at 0.7420, rebounding from morning losses of as much as 0.3% on strong jobs report
* 10-year Treasury yield at 2.57% after reaching 2.59%, highest since Sept. 2014; 10-year Australian sovereign yield up 8bps to 2.87%; 10-year JGB yield adds 3bps to 0.08%, versus BOJ policy target of around zero

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