US Dollar Struggles to Gain Ground as Treasury Yields Leap. Where to for USD?

The US Dollar sunk further today, adding to losses seen into the New York close on Monday.

The general reversal in fortunes for risk assets continued through the Asian session on Tuesday, with Australia’s ASX 200 adding over 1%. Retail sales data printed in line with expectations at 0.2% month-on-month for February.

The fairly benign number underscored perceptions of the RBA pausing its rate hike cycle on Tuesday next week. Other APAC equity markets have been mostly positive, with mainland Chinese indices only in red.

The rescue of SVB Financial announced yesterday appears to have calmed market concerns of the banking crisis enlarging.

This perspective saw further oscillation in the pricing on what the Fed will do at the next Federal Open Market Committee (FOMC) meeting in early May. The interest rate market is now pricing a roughly 50/50 bet for a 25 basis point (bp) hike.

Treasury yields leaped higher across the curve yesterday but have given up a few bp today, except the 1-year bond. It has jumped 60 bp from the low seen 2-weeks ago to be back above 4.60%.

Crude oil has consolidated yesterday’s outsized gains with the WTI futures contract near USD 73 bbl, while the Brent contract is a touch under USD 78 bbl. Natural gas failed to be swept up in oil’s rally as it languishes.

Gold has slightly recovered from yesterday’s selloff, trading above USD 1,950. The Japanese Yen has been today’s outperformer in currency land, with USD/JPY edging toward 130.50. All other G-10 currencies are firmer to some degree against the greenback.

Several speakers from the European Central Bank (ECB) and the Bank of England (BoE) will be today.


The DXY index has not increased with the increase in Treasury yields this week. This dislocation might be worth watching and provide clues for risk appetite across different asset classes.

If yields continue higher, but the US Dollar struggles to gain traction, it may indicate an increased appetite for other risk assets, such as AUD and NZD.

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