U.S. mortgage rates fell in step with bond yields in the wake of weaker-than-expected domestic economic data and as investors scaled back expectations about the number of interest rate increases by the Federal Reserve in 2017.
The U.S. dollar edged down slightly, as U.S. Treasury yields fell for the second day. Fed Chair Janet Yellen didn’t provide any new catalyst to traders about the prospects for a June hike or how the Fed will proceed with shrinking the balance sheet. She expressed her confidence that the economy will continue to grow at a moderate pace and that rates will increase gradually; however, this was nothing new to investors.
The dollar hit a three-week high against the yen on Thursday, on course for a fourth straight day of gains after a strong ADP job number in the previous session broke 10-year U.S. government bond yields out of a long-held range.
The rate banks charge each other to borrow dollars for three months fell by the most in nearly four months on Tuesday, following a broad pullback in benchmark bond yields the day before on worry over U.S. President Donald Trump's tough stance on trade.
A month ago, the dollar and stock markets were riding high as investors bet that the Trump administration, together with the Republican-controlled Congress, would usher in an era of lower taxes, more government spending and looser regulations.
Worries over Donald Trump's economic policies and the potential for U.S. policy errors rose sharply this month, according to a survey of fund managers released on Tuesday, prompting them to hold more cash even though they expect growth and inflation to rise further.
Talk of Britain drastically reworking trade ties with the European Union after Brexit sent the pound tumbling to two-month lows on Monday, as signals that U.S. interest rates could rise three times this year lifted the dollar.