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Dollar Forex Market Drops Off Slightly Amid High Treasury Yields

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  • Dollar Index Moved Down Ahead of Fed Speech
  • US Treasury Yields Hit New High
  • Wall Street Continues Positive Run

The US Dollar forex market dropped off slightly to start the week as those trading the currency wait for further guidance from the Fed on interest rate hikes to come, and take a pause to consider what may happen in the Russia-Ukraine conflict which still has not been resolved. This has caused the Dollar Index range to widen and will likely see it remain within this range for some time. Trading today brought the 10-Year US Treasury yield to new highs not seen since 2019 as it tipped above 2.3% at the end of the day. Meanwhile, stocks continue their positive run into the new week with all major indices gaining points. 

Dollar Trading Cautiously Ahead of Speech

Those forex trading the US Dollar have seen a period of unrivaled strength from the currency. In the face of inflation and an unstable global situation with Ukraine, this strength has not shown any clear sign of diminishing. The US Dollar Index has though entered a more cautious period of trading, albeit at high levels. 

This range runs from just under 98.00 to just over 99.00 as the market waits for further news from the Fed on the rest of the seven proposed rate hikes for the year. This follows the 25 basis point increase which took place last week. Traders may expect more guidance from Jerome Powell who is due to speak tomorrow with investors already taking on board his comments on Monday that inflation is much too high. 

Treasury Yields Hit Multi-Year High

As forex brokers and traders alike dissected the Fed Chairs' comments from early in the week, analysts almost uniformly began to raise expectations of a more aggressive rate hike to come from policymakers in a bid to tackle problematic inflationary pressure. 

The result of these moves has seen US Treasury Yields spike to levels not seen since mid-2019. The 10-year finished the day close to 2.4% and on the rise while the 30-year yield also moved higher above 2.6%. Some analysts also forecast 50 basis point increases at the May and June Fed meetings as the expectation of tighter monetary policy grows.

Stocks Move Higher Close to Record

Stocks on Wall Street largely carried on where they finished the previous week.  Following a down day on Monday, the major indices were back in positive territory today. The tech-heavy NASDAQ was a particular winner as it put aside its recent struggles to gain more than 2% and be the outperformer of the day. 

As the Fed promised tough action on inflation, both the S&P 500 and Down Jones also gained. The former now sits within 5% of its record high again after gaining more than 1% while the Dow Jones was not left out and gained more than 200 points in a largely positive session.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.