USD Index Hits Six Week High

By: Hillel Fuld
The USD index hit a six-week peak on Monday, getting a push by higher U.S. Treasury yields. The EUR was stung as Ireland's growing debt problems shook confidence in the euro zone.
The 10-year Treasury yield hit a two-month record as the WSJreported that a group of Republican-leaning economists is creating a campaign calling for the Federal Reserve to drop its program to buy $600 billion of Treasuries.

That caused more short-covering in the dollar, which had been sold aggressively as investors wagered the Fed would print hundreds of billions of dollars to shore up the economy.
Analysts believe the Federal Reserve's recent announcement to implement more financial easing will limit upside for Treasury yields, but they added that speculators saw higher yields as a go-ahead to buy the dollar.

"There's definitely a limited upside to U.S. yields given QE, but their rise has contributed to a higher dollar," said Carl Hammer, chief currency strategist at SEB in Stockholm.
The EUR hovered near a six-week low hit late last week, having taken a hit as Irish bond yields have rocketed on the country's struggles to control its spiraling debt.

Dublin has not applied for EU assistance yet, but it has not ruled out doing so in the future. This has threatened to plunge the entire euro zone into another crisis of confidence.
Still, some investors have taken heart from reports that the European Union has an aid package of up to 90 billion EURs prepared for Dublin, which has helped stem a flight-to-quality rally in Treasuries, pushing yields higher.

The dollar index .DXY, which tracks the dollar's value against a currency basket, rose roughly half a percent on the day to 78.513, its highest in approximately six weeks.