We expect rising UST yields to extend the dollar’s rally

We expect further rises in US Treasury yields to support continued gains in the US dollar against most other developed market (DM) currencies, especially the yen and the Swiss franc.
Jonathan Petersen Markets Economist
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US dollar edges lower ahead of next round of CB meetings

With a couple of exceptions, currency markets have had a quiet week; the US dollar is ending the week a touch weaker against most other currencies, but in aggregate it remains close to its strongest level for the year. With US bond yields continuing to rise and expectations for Fed rate hikes in the second half of next year solidifying, we think the dollar will remain strong over the coming months. The upcoming week kicks off the next round of central bank policy announcements, with the ECB and the BoJ (neither of which we think will alter their policy settings), as well as the Bank of Canada, (which we expect to signal the end of its balance sheet expansion). To the extent that next week reinforces the widely held view (which we share) that the ECB and BoJ will remain well behind other central banks in normalising policy, it may add to downward pressure on the yen and euro.

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Most signs point to further trouble for the Turkish lira

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22 October 2021

FX Markets Weekly Wrap

US dollar falls back as Treasury yields edge down

The US dollar seems set to end the week lower against most currencies, as “risky” assets have rallied and US Treasury yields have edged down a bit. This fall back in the dollar and US yields is somewhat surprising in light of the stronger-than-expected inflation data released Wednesday. But we think those data add to evidence that inflationary pressures in the US remain strong, and will gradually push Treasury yields, and the dollar, higher. And while this week’s rebound in risky assets suggests that concerns about the global economic recovery are fading, the latest activity data from China and the US (due on Monday) are likely to set the tone for FX markets next week.

15 October 2021

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We expect commodity currencies to remain under pressure

Although the currencies of most commodity exporters appear undervalued in the context of high commodity prices, we still think most commodity currencies will depreciate further against the US dollar.

11 August 2021

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Dollar resumes its rally on the back of strong US data

The US dollar is ending the week higher against most currencies, extending its gains alongside rising US Treasury yields following the stronger-than-expected July payrolls data. With Fed officials earlier this week suggesting that several more months of strong economic data may be enough to start tapering asset purchases, next week’s US inflation data could reinforce expectations that policy normalisation may not be far off. Although we think that the pace of the economic recovery in the US will moderate in the coming quarters, our view is that the dollar will rally further as underlying growth and inflation in the US remain stronger than in most other major economies.

6 August 2021

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We think US real yields are unlikely to stay this low

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28 July 2021
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