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The Dollar Jumps as Treasury Yields Spike

dollar, treasuryThe U.S. dollar, this morning during Asian trade hours, has hit a four month high. The dollar has been buoyed by a spike in the 10 year U.S. Treasury yield. The benchmark note is toying with the psychologically key three percent level. This saw investors buying the U.S. currency which weakened the euro and yen this morning.

The 10 year benchmark, during North American trade hours, traded at its highest in over four years. This was just below three percent at 2.998 percent. The rate is being supported by investor worries over the growing supply of government debt. There is also accelerating inflation as commodity prices are moving higher. This includes oil

The three percent barrier, for now is holding. The U.S. currency is also strong thanks to an improving trade outlook with China.

This morning, the dollar index rose. It was last trading up by 0.69 percent at 90.94. This is the index’s highest level since January 18.

Dollar Traders react with Optimism to China vs United States Trade Headlines

In the headlines, Treasury Secretary Steven Mnuchin said that he may go to China. This signaled that there could be an easing of tensions between the world’s two largest economic powers.

Rising bond yields have not always caused a firm greenback. There has been a great deal of U.S. political uncertainty. Also, geopolitical tensions have sometimes caused a separation between rates and the USD.

However the benchmark 10 year Treasury yield is toying with three percent. Also, the gap between U.S. and German government Bund rates are now at a 29 year high. Traders saw this yield advantage and bough the U.S. currency.

The EUR/USD Forex market was down 0.67 percent to $1.22.The euro was not helped by data that showed that business activity, for the month of April in the Eurozone, was stable.

The euro has seen a strong rally until February. It is now back within its trading range with the greenback. The European Central Bank has said they might raise rates sooner than anticipated.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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