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US dollar buoyant near 11-month highs, shaky pound awaits BOE

@djmckennon

The US dollar hovered near an 11-month high against a basket of currencies on Thursday, supported by a rise in US yields, while the pound struggled at its lowest level since November 2017 ahead of Bank of England’s monetary policy decision.

The US dollar index against a group of six major currencies stood at 95.11 after rising to 95.299 overnight, its highest since mid-July 2017.

Buoying the greenback, long-term Treasury yields bounced back from three-week lows on Wednesday as risk aversion that took hold earlier in the week amid the US-China trade tensions eased for now.

Treasury yields also were propped up by remarks from Federal Reserve Chairman Jerome Powell, who said on Wednesday that the US central bank should continue with a gradual pace of rate increases.

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“Powell’s remarks were not particularly ground breaking but it appears to have helped the dollar just as US equities are recovering after being oversold on earlier risk aversion,” said Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch in Tokyo.

SEE ALSO: US dollar hits 11-month high amid trade conflict

The US dollar stood little changed at 110.38 yen after gaining 0.3 per cent overnight. The US currency had fallen to a one-week low of 109.55 on Tuesday.

The euro was a shade higher at US$1.1577 having a lost 0.15 per cent the previous day.

The pound stood little changed at US$1.3173 after slipping overnight to a seven-month low of US$1.3145.

Sterling managed to move away from the seven-month low after British Prime Minister Theresa May won a crucial Brexit vote in parliament, averting a rebellion that could have undermined her authority.

But the bounce by the pound was limited ahead of the BoE’s policy-setting meeting later on Thursday, which is expected to set the currency’s near-term direction as the central bank weighs the prospects of a future interest rate hike.

The BOE is widely expected to stand pat on policy this time and focus is on how strong the signals are for the possibility of rate increases at the next policy meetings in August and December.

The Australian and New Zealand dollars were flat at US$0.7370 and US$0.6864, respectively, with the Aussie having managed to crawl off a 13-month trough plumbed earlier in the week.

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