Dollar shines, U.S. yields surge on upbeat U.S. data

Wed Jul 30, 2014 10:42pm EDT
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By Hideyuki Sano

TOKYO (Reuters) - The dollar stayed strong and U.S. bond yields held firm on Thursday after data showed solid U.S. economic growth, even as the Federal Reserve repeated its message that it is in no hurry to raise interest rates.

The prospect of a solid U.S. recovery underpinned equities, with Japanese shares leading the gains thanks to the yen's fall against the dollar.

The Nikkei average rose 0.4 percent while Australian shares inched up to hit six-year highs. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 percent but held near 6 1/2-year high hit on Wednesday.

U.S. April-June gross domestic product expanded at a 4.0 percent annualised rate as activity picked up broadly, while the reading for the first quarter was revised up to a contraction of 2.1 percent from an earlier estimate of a 2.9 percent drop.

"The data led markets to think that there's no need to be pessimistic about the U.S. economy," said Makoto Noji, senior strategist at SMBC Nikko Securities.

The GDP data increased expectations that the Fed is moving closer to an interest rate hike that many expect will occur next year if the economy continues to gain momentum.

The 10-year U.S. debt yield jumped to as high as 2.569 percent, posting its biggest daily rise since November and last stood at 2.55 percent.

Two- and three-year note yields rose to their highest in three years.   Continued...

Punctured euro banknotes which are used to train sniffer dogs, are presented to the media during a news conference on German custom's annual statistics, in Berlin March 21, 2014. REUTERS/Tobias Schwarz