U.S. dollar ticks up in step with Treasury yields

FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese 100-yuan banknotes are seen in a picture illustration shot January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

NEW YORK (Reuters) - The U.S. dollar rose on Wednesday alongside Treasury yields, boosted for the second straight day by strong economic data earlier this week.

The dollar index .DXY was 0.18% higher to 97.400, with the 10-year Treasury note yield US10YT=RR up 3.3 basis points at 1.922%.

“(Foreign exchange) trade was very quiet in N.Y. on Wednesday, though the (dollar index) managed a one-week high of 97.47 early in the session,” wrote Ronald Simpson, managing director, global currency analysis at Action Economics. “There was no data to drive the market, though firmer Treasury yields provided some support to the USD.”

U.S. industrial production rebounded in November, mainly because a strike by General Motors Co GM.N workers ended. Housing starts and building permits both grew more than expected in November, and October job openings exceeded forecasts, suggesting that the U.S. labor market remains strong.

Expectations the Federal Reserve will cut the federal funds rate from the current 150-175 basis point level are 2.2% for the central bank’s January meeting, 4.3% for March and 11% for April, according to CME Group’s FedWatch tool. The same tool shows a 52.9% chance that rates will remain at current levels through December 2020.

“Bottom line: the U.S. economy remains on solid footing even as the rest of the world struggles,” wrote analysts at Brown Brothers Harriman.

The dollar rose 0.3% against the euro EUR= to $1.112. The single currency has struggled to stay above its 200-day moving average of $1.115. The dollar was 0.34% higher against the pound GBP= at $1.308, which has lost all its election gains on fears Britain could leave the European Union without a trade deal.

U.S. government bonds and the dollar both shrugged off the likely impeachment of President Donald Trump. The U.S. House of Representatives is set to vote for impeachment on Wednesday on charges that Trump abused his office and obstructed a congressional probe. Although Trump would only be the third president in U.S. history to be impeached, U.S. markets brushed it off because the Senate is unlikely to convict him.

The normally sleepy Hong Kong dollar HKD= hit a five-month high, roused into its sharpest rally in a year by investment flows from China, cooling unrest and a global unwinding of long positions in the greenback. It remained slightly off its July high of 7.7822.

Reporting by Kate Duguid and Olga Cotaga; Editing by David Gregorio and Richard Chang