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The US dollar and the euro were basically flat on Tuesday, after the US 10 year yield reached an important psychological barrier of 3%.
The US dollar index hit 91.076 of the three month high, but the rise in US bond yields pushed the US dollar up sharply on Monday.
"Yesterday was a big day for the US debt yield on the exchange rate, and today, 10 - year bond yields climbed above 3% and did not have a big impact on the exchange rate," said Alan Ruskin, the global head of Deutsche Bank's foreign exchange strategy.
The yield on the US 10 - year treasury bond rose 3% on Tuesday, the first time in more than four years that investors have reduced their holdings of debt because they are worried about rising inflation and increased supply of public debt.
On Tuesday, the dollar rose, driving the euro to a little below the two - month low on Monday, as the market grew worried that a rise in US debt yields could weaken the incremental demand for euro zone bonds and stocks as hedge funds accumulated record Euro positions.
The ECB policymakers may hint at Thursday's policy meeting that they will take a more cautious stance. This lingering worry also reduces the euro.
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