Dollar rebounds on dip-buying, rouble surges on adjusted Russian sanctions

NEW YORK (Reuters) - The U.S. dollar rebounded from its weakest level against a basket of major rivals since mid-November on views that the greenback’s longer-term upward trend remained intact, while the rouble surged after the U.S. Treasury adjusted sanctions on a Russian spy agency.

U.S. dollar notes are seen in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration

Analysts said U.S. yields would remain more attractive than yields on other countries’ bonds given the likelihood of steady interest rate increases from the Federal Reserve this year, while superior U.S. economic growth would also underpin the greenback.

That outlook drove the dollar index, which measures the greenback against a basket of six major rivals, to last stand up 0.2 percent at 99.807 after touching its lowest since Nov. 14 at 99.233 in morning trade in Europe.

The euro was last slightly lower against the dollar at $1.0760, easing from an eight-week high of $1.0828 struck in the morning U.S. trading session. The dollar remained down 0.5 percent against the yen at 112.71 yen, but off a session low of 112.06 yen.

“I personally would be a dollar-dip buyer,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “Worst-case scenario, the dollar will be steady and bumping along the top of the 15-year cycle.”

Aggressive language from President Donald Trump on Iran and a refugee deal with Australia had weakened the dollar earlier by putting the focus back on the geopolitical risks from his administration rather than the expectations of higher inflation that dominated markets’ initial thinking last year.

A Federal Reserve policy statement released on Wednesday had also contributed to the dollar’s weakness by disappointing investors who were hoping for clearer signs on rate hikes.

The dollar index has fallen steadily since Jan. 3, although traders stressed it was not obvious it would fall much further ahead of U.S. jobs numbers on Friday. Economists polled by Reuters expect U.S. employers to have added 175,000 jobs in January, up from 156,000 in December.

The Russian rouble rose to as high as 2.5 percent on the day against the dollar. Most of the gains came after the U.S. Treasury adjusted sanctions on Russian intelligence agency FSB. The dollar hit 58.5580 roubles, its lowest level since July 2015.

“We have the first instance of the new administration taking a different tack with the Russian government,” said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey. “If that foretells better relations, then that will be better for the rouble.”

Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Andrea Ricci and Sandra Maler