US Dollar plunges against euro on rising European yields

New York (May 6)  The U.S. dollar hit its lowest level against the euro since late February on Wednesday after a rise in European yields drove demand for the euro and weak U.S. data supported expectations that the Federal Reserve will delay hiking interest rates.

European yields continued to climb, with 10-year German bund yields hitting their highest levels of the year at 0.595 percent. The rise alleviated concerns that the yields could hit negative levels after falling to a record low of 0.05 percent last month.

"Europeans feel more comfortable in their skin right now," said Steven Englander, global head of G10 foreign exchange strategy at CitiFX in New York. "Now that those fears are kind of being unwound to some degree, it is supportive of the euro," he said on the concerns about negative bund yields.

The euro hit $1.1372, its highest level in roughly 10 weeks. The yield gap between U.S. 10-year Treasury yields and their German counterpart shrank to about 165 basis points, the narrowest since late March, making the euro more attractive to investors chasing yields.

The euro zone common currency was most-recently up 1.52 percent at $1.1353.

The dollar hit its lowest level against the Swiss franc in over three months at 0.91140.

The ADP National Employment Report showed U.S. private employers added 169,000 jobs last month, the fewest since January 2014 and far below economists' forecasts, reinforcing expectations that the Fed will hold off raising rates for longer.

The data came ahead of Friday's U.S. nonfarm payrolls report for April. Economists expect U.S. employers to have added 224,000 jobs last month, according to a Reuters poll. While that would mark a nearly 100,000 increase from the previous month, analysts said markets are bracing for a disappointing number.

"The ADP is an early signal that the nonfarm payrolls may disappoint to the downside," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. "That will certainly put the Fed on hold."

The dollar index, which measures the greenback against a basket of six major currencies, was last down 1.01 percent at 94.11. The dollar was last down 1.29 percent against the Swiss franc at 0.9154 franc. The dollar hit a nearly one-week low against the Japanese yen of 119.36 yen .

U.S. 10-year Treasurys yields were last up to 2.23 percent, from a yield of 2.18 percent late Tuesday .