The dollar strengthened and U.S. Treasury yields hit a two-week high on Monday on expectations the Federal Reserve will give a signal this week that it is gearing up to raise interest rates.
An upbeat assessment of the U.S. economy’s strength from Fed Vice Chairman Stanley Fischer on Sunday was seen raising the prospect of Fed chair Janet Yellen flagging up a rate rise at a meeting with the world’s central bankers on Friday.
The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.4 percent to 94.872 , pulling away from a six-week low hit last week after minutes of the Fed’s last policy meeting showed rate-setters split on when to hike.
U.S. 10-year Treasury yields touched a two-week high of 1.60 percent on Monday while shorter-dated yields touched levels not seen since Britain’s shock vote to leave the European Union in June.
World stocks fell 0.13% early on Monday but were flat early morning after a bounce-back in Europe , led up by Syngenta after its proposed takeover by ChemChina was approved by U.S. regulators.
“The market took his (Fischer’s) remarks to mean that the Fed’s Yellen might blow the same trumpet in her upcoming Jackson Hole remarks,” analysts at RBC Capital Markets said in a note.
Global central bankers will join the annual mountain retreat that in Jackson Hole, Wyoming on Thursday, with Yellen due to speak the following day.
Emerging stocks and currencies fell broadly on Monday. Many emerging countries borrow heavily in US dollars meaning an appreciation in the greenback makes it more expensive for them to service their debt.