Dollar Strengthens for Second Day as Treasury Yields Rise on Oil

• Dollar Strengthens for Second Day
• Treasury Yields Rise on Oil

The dollar advanced for a second day as traders increased bets the Federal Reserve will raise interest rates this year and as a jump in oil prices pushed up Treasury yields.

The U.S. currency strengthened against all except one of its 16 major counterparts as the probability the Fed will tighten this year climbed to 68 percent, the most since June. The greenback also rose as the second U.S. presidential debate Sunday added to speculation Democratic nominee Hillary Clinton will prevail over Republican Party candidate Donald Trump. New Zealand’s dollar dropped for a seventh day.

“The dollar has risen on the back an increase in pricing expectation of a December hike as the probability of a Clinton presidency has increased and more recently as oil prices have risen,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “The dollar got another leg higher following the move higher in U.S. Treasury yields at the Asia open.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.2 percent as of 11:41 a.m. in Tokyo after gaining 0.1 percent Monday. The dollar climbed 0.4 percent to 103.97 yen and appreciated 0.1 percent to $1.1126 per euro.

Oil Agreement

Saudi Arabia and Russia, the world’s two largest crude oil producers, said they’re ready to cooperate to limit output, helping send prices to a one-year high in London. Oil has surged about 15 percent in the past two weeks, and this will add to inflationary pressure in the first quarter of 2017, according to Macquarie Bank Ltd. Canada’s dollar was little changed at C$1.3186 to the U.S. currency after jumping 0.9 percent Monday. Crude is the nation’s second-largest export.

“Every central bank will be affected and will have to rewrite their forecasts and their guidance, but a stronger dollar will probably emerge from the ensuing volatility — except against the Canadian dollar — as U.S. Treasury yields keep rising,” Macquarie Bank analysts including Nizam Idris, head of foreign-exchange and fixed-income strategy, wrote in a note to clients. “A more-hawkish Fed should trump less-dovish central bankers elsewhere in terms of FX impact.”

New Zealand’s dollar fell 0.5 percent to 71.01 U.S. cents and the Aussie dropped 0.4 percent to 75.74 U.S. cents.

The U.S. economy probably isn’t at full employment and inflation remains below target, Federal Reserve Bank of Chicago President Charles Evans said as he argued for keeping interest rates low until core inflation moves higher.