Dollar steadies while yields rise; eyes on Mideast risks, China data

US dollar rate index news: The dollar stood its ground on Wednesday, though it struggled for further headway despite strong US retail sales data, as traders turned their attention to looming Chinese growth figures and the escalating violence in the Middle East. A blast at a Gaza hospital dealt a blow to hopes the conflict could be contained. US President Joe Biden is en route to Tel Aviv. The Israeli shekel fell back to the weaker side of 4-per dollar after a brief bounce overnight.

US yields had shot sharply higher after data showed retail sales increased strongly and more than expected last month, in the latest sign of the economy's enduring strength. Two-year yields hit a 17-year high at 5.24 per cent. Yet the dollar, which has moved in lockstep with yields lately, was supported without gaining much. Some traders pointed to a positive survey of German business morale and a Bloomberg report suggesting the Bank of Japan is likely to revise its inflation forecasts higher as helping the euro and yen lean against any dollar strength.

The euro gained 0.1 per cent overnight and was steady at $1.0570 in Asia on Wednesday. The yen jumped briefly, before falling back to trade steady at 149.75 on Wednesday. Others suggested the lagging dollar could be a sign its recent run is losing momentum. The benchmark 10-year Treasury yield has climbed about 100 basis points since mid July, and the dollar index is up 7 per cent in the same period.

"It's had a really good run and it's stalled a bit," said Westpac analyst Imre Speizer. "Maybe it's hitting the limits of this stage of the rally, and needs a bit of a correction." The dollar index was up less than 0.1 per cent overnight to 106.26. China's yuan fell in overnight offshore trade ahead of GDP data due later on Wednesday. The Australian and New Zealand dollars were steady in early trade - though have started moving in opposite directions on interest rate expectations.

On Tuesday data showed inflation had cooled in New Zealand, while the Reserve Bank of Australia struck a surprisingly hawkish tone in meeting minutes -- sending the Aussie/kiwi cross sharply higher and through its 50-day moving average. The Aussie held Tuesday gains to buy $0.6358 on Wednesday. The kiwi nursed losses at $0.5894.