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Dollar jumps as stocks post best single-day performance in almost a decade

The dollar rallied against most of its peers as equities posted their best post-Christmas rally ever. The rally in the greenback mostly followed the move in stocks and did not stem from any new  developments from the government with the shutdown or clarity on the Fed monetary policy. Risk appetite also improved after White House Economic Adviser Hassett stated that Fed Chair Powell’s job is not in jeopardy. Towards the end of the session positive news did come out on the trade front after a report said that China and US will have mid-level talks in January.

The yield on 10-year US Treasuries also soared 7.1 basis points to 2.81%. The move higher in yields was also supported by a weak auction on five-year government debt. The Treasury data showed demand fell to the weakest level since 2009.

The dollar’s gains were strongest with the Japanese yen and Swiss franc. Price action on the USD/JPY daily chart shows that today’s rebound is took price above 111.00 level, which is near the 200-day SMA. If we see continued bullish momentum, price may target the 112.50 level. To the downside, 110.00 remains critical support.

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