US 10-year yield clocks 2-½ high

• The US 10-year yield rises to highest since July 17. 
• Further gains look likely and could propel the dollar higher. 

The yield on the US 10-year Treasury note is extending overnight gains and strengthening the case for a notable recovery rally in the US dollar. 

At press time, the benchmark yield is trading at 0.783%, the highest level since July 17, having risen by 10 basis points to 0.75% during Thursday’s North American trading hours, according to data source TradingView. 

Federal Reseve’s chairman Jerome Powell, while speaking at the annual Jackson Hole event, said that the central bank will now be willing to allow inflation to run above the 2% target before raising rates. 

Powell’s comments about relaxed inflation policy initially put a bid under bonds, pushing the 10-year yield slightly lower to 0.64%. However, the decline was quickly reversed and the yield ended the day well above technical resistance at 0.73%, validating a bullish triangle breakout seen earlier this month. 

As such, the benchmark yield looks set to challenge next resistance at 0.95%. That will likely bode well for the US dollar. 

The dollar index, which tracks the value of the greenback against majors, is currently trading at 93..04, having gained 0.12% on Thursday.