As reported by Bloomberg, the US Dollar and US Treasury yields are facing downside pressure as risk appetite attempts a recovery this week.
Key highlights
US Treasury yields are closing in on seven-year highs as traders dump US T-bills in favor of riskier, higher-yielding assets while the US Dollar sees renewed selling pressure against the broader G10 marketscape. Normally, rising bond yields would introduce some buoyancy to the USD, helping to prop up the currency, demand for emerging-market currencies as well as other high-risk assets is seeing the Greenback deflate across the board.
Markets are also adjusting their expectations for another US Fed rate hike, bringing broader forecasts in-line with the Fed’s own playbook, while broad-market buying of any other yield is seeing the standard dynamic of yields up, Dollar up begin to break down.
“Focus is starting to shift on the tightening prospects of other developed nations, diminishing the dollar’s appeal in an otherwise “very bullish set up,” according to Brad Bechtel, global head of foreign exchange at Jefferies LLC. “We are likely to see this theme of ‘buy everything else’ re-emerge back to the forefront of the market’s mindset,” Bechtel wrote in a note to clients. “This will help EM rally, G-10 as well, and put some slight downward pressure on USD.” – Bloomberg
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