Dollar perched at 3-1/2 month highs on firmer U.S. yields - Reuters News

By Saikat Chatterjee

LONDON, March 8 Reuters) - The U.S. dollar hit a 3-1/2 month high on Monday as rising U.S. Treasury yields spooked investors and boosted the greenback's safe-haven appeal.

After falling 4% in the last quarter of 2020, the dollar has strengthened by nearly 2.5% year-to-date as investors expect the broad rise in U.S. bond yields to weigh on stretched equity valuations and boost demand for the U.S. currency.

Recent economic figures are also supportive with U.S. data showing non-farm payrolls surged by 379,000 jobs last month while the U.S. Senate approved President Joe Biden's $1.9 trillion recovery package. (Full Story)

"The U.S. labour market is healing quickly, President Biden's gargantuan relief package has been approved by the Senate, and America has stepped up its immunization game, administering a record number of vaccines this weekend," Marios Hadjikyriacos, an investment analyst at XM, said.

But while U.S. yields climbed within striking distance of a one-year high above 1.62% hit on Friday, German yields dipped nearly 5 basis points last week, pulling the euro EUR=EBS to a near four-month low below $1.19.

BofA analyst Athanasios Vamvakidis said the potent mix of U.S. stimulus, faster reopening and greater consumer firepower was a clear positive for the dollar.

The dollar index =USD stood at 92.30 against a basket of six major currencies, up 0.4%, its highest level since late-November. (Full Story)

The Australian dollar AUD=D3 weakened 0.3% to $0.7658. The New Zealand dollar NZD=D3 was down about 0.8%.

The currencies have been in demand because of their links to global commodities trading, but the dollar's bounce dented both.

The dollar held near a one-month high against the British pound, at $1.3819 GBP=D3. Against the low-yielding yen JPY=EBS, the greenback held firmer at 108.56 yen, having hit a nine-month high of 108.645 on Friday.

Euro zone investor morale improves to highest in a year - Reuters News

BERLIN, March 8 (Reuters) - An investor morale index in the euro zone jumped to its highest reading in over a year in March, driven by an improved view of the current situation, a survey showed on Monday.

Sentix's index for the euro zone rose to 5.0 from -0.2 in February, the highest since February 2020. A Reuters poll had pointed to a reading of 1.9.

An expectations index advanced to 32.5 from 31.5 in February while the current situation index improved to -19.3 from -27.5 in February.

Global vaccination campaigns are making good progress, raising hopes of effective protection, Sentix said in a statement.

"Those trends allow for a faster opening of the economy. That is what investors are betting on," it added.

Investors are also seeing inflationary pressures on the rise, driven by expansive monetary and fiscal policy, as well as pent-up demand.

Sentix surveyed 1,218 investors from March 4 to March 6.

Weak construction, car industry woes push down German industrial output - Reuters News

BERLIN, March 8 (Reuters) - German industrial output fell unexpectedly in January as winter weather slowed construction and semiconductor shortages held back production in the car industry, suggesting that Europe's largest economy got off to a weak start this year.

Data from the Federal Statistics Office showed on Monday that output in the industrial sector, including manufacturing, construction and energy, was down 2.5% on the month. A Reuters poll had forecast an increase of 0.2%.

The December figure was revised up to 1.9% from a previously reported unchanged reading.

The drop in January, which ended an unusually long series of eight consecutive months of increases, was driven by a plunge of more than 12% in construction. Manufacturing output fell by only 0.5%, the ministry said.

"Despite the measures taken to contain the pandemic, output in manufacturing posted only a small decline in January which was mainly due to semiconductor shortages in the automotive industry," the economy ministry said.

Machinery manufacturers recorded a noticeable increase in output, it added.

"The further outlook for the industrial sector remains neutral for the time being," the ministry said. Strong foreign demand was offset by weak domestic demand caused by measures to contain the COVID-19 pandemic, it said.

Solid exports and construction helped the German economy to grow by a better-than-expected 0.3% in the final quarter of last year, more then offsetting a lockdown-related drop in household spending.

But Carsten Brzeski from ING said the industrial output data suggested it would be hard for industry to prevent the entire economy from falling into contraction once again.

"The sharp drop in activity in the construction sector ... doesn't bode well for the coming months," Brzeski said.

Most economists expect the economy to shrink in the first quarter, then rebound in the second.

Recent German data has painted a picture of a two-speed economy in which export-oriented manufacturers are doing well while domestically driven services are suffering under lockdown measures imposed in early November and tightened in mid-December to contain a second wave of coronavirus infections.

Industrial orders data released on Friday showed orders for German-made goods rose by twice as much as expected in January as the foreign demand more than offset domestic weakness.

Retail sales tumbled more than expected in January as the COVID-19 lockdown and the withdrawal of a temporary cut in sales tax hit consumer spending. (Full Story)

A gradual easing of coronavirus curbs in the following weeks is likely to help household spending, which should boost overall economic output in addition to manufacturing.

A survey showed last month that consumer morale brightened heading into March as shoppers became more optimistic the lockdown could be eased soon.