The dollar falls as Treasury yields remain unchanged, while commodity currencies rise.

The dollar falls as Treasury yields remain unchanged, while commodity currencies rise.

The dollar fell on Thursday as the climb in US Treasury yields this week came to a halt, while the Canadian and Australian currencies rose on the strength of higher commodity prices and economic growth confidence.

The euro and sterling rebounded after having their worst days in a month on Tuesday, when the dollar was boosted by a rise in Treasury yields in the United States.

The initial gains, however, had faded by 1100 GMT, with investors wary about the next move in government bond yields.

The euro was recently trading at $1.1346, up slightly on the day but still behind its previous high of $1.1369.

The pound was 0.1 percent higher at $1.3622 per dollar, while the yen was slightly stronger at 114.26 per dollar.

The dollar index, which compares the greenback to six major currencies, is now at 95.563, down 0.1 percent on the day.

Despite a substantial spike in anticipation that the US Federal Reserve will begin rising interest rates as early as March to combat skyrocketing inflation, the dollar has not performed as well as expected recently.

The yield on the benchmark 10-year note in the United States was 1.8379 percent, down from the two-year high of 1.902 percent recorded on Wednesday.

The gains come as traders anticipate the US tightening monetary policy at a faster rate than previously anticipated. Fed funds futures have fully priced in a rate hike in March, with a total of four hikes in 2022.
In other markets, the Aussie and the Loonie were boosted by a mix of increased commodity prices and expectations of tighter policy.

The Australian currency rose 0.4 percent to $0.7237, extending gains from the previous day, while the Canadian dollar retreated from a 10-week high reached on Wednesday, with one US dollar worth C$1.2493.

A positive Australian labor market figure overnight, according to analysts, also aided the Aussie.

"The latest Australian employment report...reinforced predictions that the RBA (Reserve Bank of Australia) will decide to bring the QE (quantitative easing) program to an end as soon as possible at their next policy meeting on February 1st," said MUFG analyst Lee Hardman.

Hardman pointed out that the Canadian dollar has outperformed the other G10 currencies in 2022, citing a steep rise in oil prices — which have reached seven-year highs — and expectations that the Bank of Canada may begin raising rates shortly.

The Norwegian crown, which is also related to the price of oil, plummeted after the central bank decided to retain interest rates at 0.5 percent and said it was on track to raise them in March. Some merchants were disappointed since they had hoped for a faster response.