Dollar follows Treasury yield higher

Aussie dollar rallies to 18-year high; New Zealand surprises

By Wanfeng Zhou, MarketWatch

Last Update: 4:38 PM ET Jun 7, 2007

NEW YORK (MarketWatch) -- The dollar rose against other major currencies Thursday, boosted by higher Treasury yields and reports that North Korea might have fired several missiles.

Treasurys sold off sharply Thursday, thrusting the benchmark yield above 5% for the first time since August, on the heels of a global sell-off of government bonds triggered by foreign rate hikes. See Bond Report.

"The dollar found some support from flight-to-safety flows," said Charmaine Buskas, economist at Moody's Economy.com. "It also gained as yields on long-dated Treasurys continue to rise and are now above the 5% level for the first time in nearly 10 months."

"The consensus is that global growth remains healthy and suggests that rates elsewhere across the globe [with the exception of the U.S.] are headed higher," she said.

Late in New York, the euro fell to $1.3425, compared with $1.3504 late Wednesday. The dollar was quoted at 120.88 yen, compared with 121.04 yen.

The British pound stood at $1.9777 vs. $1.9929. The dollar also changed hands at 1.2246 Swiss francs, compared with 1.2161 francs.

The euro traded at 162.32 yen vs. 163.47 yen. The euro climbed to an all-time high at 164.60 yen on Tuesday. See currency rates.

The yen advanced, as a sharp sell-off in U.S. equities triggered some unwinding of carry trades - in which investors borrow low-yielding currencies, such as the yen, and reinvest in higher-return currencies and assets.

U.S. stocks fell sharply on Thursday, sending the Dow Jones Industrial Average down by over 140 points, as mixed May sales from the nation's retailers and lower jobless claims helped push the yield of a key benchmark bond above 5%, further challenging the attractiveness of stocks. See market snapshot.

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