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(Bloomberg) -- The dollar rose to its highest since mid-July as U.S. Treasuries declined, sending the yield on the 10-year briefly over 2.41 percent, while markets awaited developments on the central bank front.

Trading flows were modest ahead of meetings by the Bank of Canada on Wednesday and the European Central Bank on Thursday. Focus was also on the Riksbank and the Norges Bank, which both meet Thursday too. While none of the banks was expected to change rates, traders will look for clues on whether the trajectory of policy is changing. For the ECB, markets hoped for fresh insight on the future scope of asset purchases as the bank prepares to taper quantitative easing.

  • The dollar is higher vs a majority of its G-10 peers, with strongest gains vs the New Zealand dollar, the pound and the yen. The greenback, up for a third day, is also gaining vs a majority of EMFX. The kiwi remains defensive amid reports the new Labour-led government plans to review the RBNZ’s policy mandate, while USD/JPY gains reflected that currency pair’s long-standing sensitivity to Treasury yields. The yield on the 10-year rose as high as 2.412%, its highest since mid-May
  • USD performance remains handicapped by uncertainty surrounding succession at the Fed and whether President Trump will appoint a chair perceived as more dovish or hawkish than the incumbent, Janet Yellen, who remains in the running to be reappointed. Trump’s feud with Republican Senator Bob Corker flared up again after Corker said the president should stay out of the tax-overhaul effort
  • The euro is higher vs a majority of its G-10 peers, shrugging off concerns over political unrest in Spain. The currency was little impacted by data that showed the Markit eurozone manufacturing PMI rose to 58.6 from a prior reading of 58.1 and vs expectations for a decline to 57.8, though a composite PMI reading declined more than expected
  • EUR/USD traded at ~1.1762 after rising to a fresh daily high at 1.1777 in recent trading, supported in part by EUR/CHF, which touched its highest since the SNB removed the EUR/CHF floor at 1.2000 in January 2015. DTCC data show options traders still prefer upside exposure for Thursday’s ECB meeting
  • GBP/USD dropped to fresh daily low at 1.3113, extending a drop below its 55-DMA at 1.3152. Support may be at the Friday low of 1.3088. The pair hasn’t reached its 100-DMA, now at 1.3053, since early September
  • USD/JPY rose to a fresh daily high at 114.00 and remained close by as yields and U.S. stocks rose. The pair rebounded from a late Monday drop to 113.25 as speculators and other short-term players prefer to buy dips, according to traders. USD/JPY may find tech resistance at Monday’s 114.10 peak seen in the wake of Japan’s election. Order books remain thin on a 114.00 handle, and USD/JPY may face further resistance at the mid-July high at 114.49, though stop-loss buy orders may be seen on a break above there, traders said Monday
  • Some information comes from foreign exchange traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly

To contact the reporter on this story: Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang, Elizabeth Stanton

©2017 Bloomberg L.P.

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