Dollar Gains on Rising Yields, Sterling Slips as Retail Sales Slump by

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By Peter Nurse The U.S. dollar strengthened in European trading Friday as Treasury yields pushed towards new highs. Sterling weakened as retail sales fell in September, while the U.K. political turmoil continues. 

At 03:55 ET (7:55 GMT),, which tracks the greenback relative to a basket of six currencies, rose 0.1% at 112.980.

The U.S. is expected to continue its aggressive interest rates hikes at its next meeting in November. Fed policymakers will continue to push for tighter monetary policies to limit the soaring economy.

Federal Reserve Bank of Philadelphia President Patrick Harker said Thursday the central bank is not done with raising its short-term rate target, saying  “given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year,” compared with the current federal funds rate target of between 3% and 3.25%.

This hawkish talk led to U.S. Treasury yields rising to new multi-year highs and pushing to 32-year highs over 150. They currently stand 0.2% higher at 150.41.

Markets remained alert for any Japanese intervention, even though the Japanese authorities’ decision to buy yen at the 145 level last month has had very little impact.

“We cannot tolerate excessive moves by speculators,” said Japanese Finance Minister Shunichi Suzuki on Friday. “We will respond appropriately while watching currency market movements with a high sense of urgency.”

The U.K. fell 0.5% to 1.1990 in September after it fell for the second straight month. It fell 1.4% on the month and 6.9% in the year as consumers cut back on spending to combat runaway inflation. This brought the country closer to the brink of recession.

After six chaotic weeks of office, the British Prime Minister resigned, the pound had already lost its early gains and sank to its lowest level in a week. 

The stock fell 0.1%, to 0.9770, after European Union leaders failed to agree to cap gas prices. Instead, they decided to continue to examine options to fix a cost ceiling in the early hours of Friday morning.

High energy prices are driving inflation in the region, which is likely to prompt the government to take more drastic measures, increasing the risk of recession across the continent.  

The stock fell 0.1% to 0.6274, and fell 0.3% to 0.5644, weighed down by waning risk sentiment. Meanwhile, the stock rose 0.4% to 7.2472, trading close to a 14-year high amid growing uncertainty about the Chinese economy following the delay in key third-quarter GDP data.

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