King Dollar set to regain crown as Treasury bond yields hit fresh one-year peak



by   |  VIEW 655

King Dollar set to regain crown as Treasury bond yields hit fresh one-year peak

On Friday, the American Dollar had notched a Newtonian rally across the board following a sharp spike in US Treasury bonds as investors were heavily pricing in on the prospects of an inflation-surge following an end to a year-long pandemic-led lockdown.

In point of fact, in the day’s broad-based gain in US Dollar came against the backdrop of a growing fret of an inflation surge as beforementioned, as US consumers would likely to perk up expenses following the roll out of a latest trillion-dollar stimulus bill which the US President Joe Biden had signed off into a law on yesterday.

On top of that, Labour Department data revealed earlier in US trading hours had unfolded that the US producer prices index had shelved their largest annual gain since October 2018 in February, eventually ratcheting up worries over a hike in inflation which in turn had helped US Dollar regain its safe-haven appeal.

Apart from that, a rise in US Treasury bond yields coupled with a lack of material rooms for further growth in US equity markets, have been prompting investors to ditch out growth stocks while flocking US Treasury bonds.

US Dollar gains across the board, but ends week slightly lower

Citing statistics, in the day’s FX market round off, the US Dollar Index (DXY) measured against a basket of six major currencies on an average rose 0.25 per cent to 91.66 after hitting a four-month peak of 92.50 on Tuesday.

Aside from the, the bloc’s common currency euro, shared among 19 member states in the euro zone, wrapped up the day 0.3 per cent lower to $1.1950 against its American counterpart, while the safe-haven Japanese yen faltered 0.52 per cent against the greenback to 109.05 yen per Dollar.

Meanwhile, addressing to a growing grudge over a likely upswing in US inflation by Spring, a managing director at BK Asset Management, Kathy Lien said, “Bond yields have been in a very strong uptrend and with the PPI numbers somewhat higher than consensus, that’s contributing to the rise.

That’s widely positive for the dollar, as the greenback has been taking its cues from yields and these new highs are really encouraging more demand for the greenback, especially at a time when you have the ECB accelerating bond purchases and being a little bit more dovish.