Nervous bond market helps dollar

Dollar strengthens for a second day on yesterday’s equity route and investor angst around soaring US Treasury yields

Financial markets are focused on the US 10yr yield, which continued its climb throughout yesterday’s trading session. The dollar is benefiting as a safe-haven asset.  The pound, euro and Canadian dollar, which all gained earlier in the week, gave back much of those gains amid the ‘risk-off’ equity market sell-off yesterday.  US PCE inflation data for January released this morning came in as expected which may help to calm the markets.

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  • FX Rates
    February 26, 2021

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  • USD

    Comments from members of the Federal Reserve’s FOMC rate setting committee yesterday afternoon highlighted the view that monetary policy will remain ultra-loose for an extended period. Financial markets translated that to a reinforcement of the “reflation trade”.  The impact on the US dollar is less clear, but many see the greenback continuing its bear cycle.

    University of Michigan Consumer Confidence for January will be released later this morning.


    The pound has lost 1.7% vs. the US dollar since late yesterday, as the FX markets sold recent winners in favor of the safe-haven dollar.  The pound remains, however, up 2% since early February and up 13% since July 1st.


    The euro peaked yesterday above $1.22 then gave back a full penny to $1.21 as uncertainty regarding rising bond yields caused FX traders to close bullish euro positions and flee to the safety of the US dollar.  The Eurozone continues to struggle with vaccination roll-outs, leading investors to believe the common market will lag other global economies in its recovery from the pandemic.  Still, the euro is up 8% vs. the dollar since July 1st and many FX market watcher consider the euro undervalued relative to the dollar.


    The Canadian dollar is weaker this morning amid overall US dollar strength.  The price of oil was able to hold onto recent gains through yesterday’s equity market selloff, but is down this morning.  Oil is up over 50% since the US presidential election.  The OPEC meeting next week could cause volatility in USD/CAD.


    Off-shore renminbi (CNH) sold off to over 6.5 as the equity market route picked up momentum but then reversed and is now at 6.47.  The onshore CNY showed similar price activity as the move was within the PBOC’s daily 2% range.

    The Japanese yen lost some ground to the US dollar but gained relative to most other currencies on the yen’s safe-haven role.

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Peter Compton
Peter Compton

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