Rising Treasury Yields Fuel U.S Dollar Surge

In the wake of investor concerns about the Federal Reserve withdrawing policy support just as global growth headwinds gather, the dollar traded near its highest levels of the year on Wednesday.

The greenback propelled high pushing the dollar index to an 11-month high of 93.8 before retreating slightly at the Asian trading session on Wednesday.

The further upside would be met by the 2021 top at 93.72 price band before the November 2020 high at 94.30 could be seen if the price breaks out on top of this level.

In the meantime, and looking at the broader picture, we continue to see a positive outlook for the dollar while above its 200-day SMA, which is currently at 91.51.

The dollar bulls are rampaging despite macros showing the US Conference Board consumer confidence dipping to 110.3, as the spread of the Delta variant dampened optimism and spending intentions for homes, autos and major appliances weakened.

For the bulls to keep control, they will need a daily close above the 93.80 resistance level.

Thereafter, the 94.00 round figure may motivate bulls to chase the high of 94.30 in November last year.

As Fed tapering looms before the year’s end and as inflation looks stickier than expected, the 10-year Treasury yield edged higher – up 25 basis points in five sessions to 1.5548%.

Japan’s currency, which is sensitive to U.S. yields and can be affected by higher rates, has fallen about 2% in five sessions and has fallen to an all-time low of 111.57 per dollar, almost exactly two months ago.

Oil prices slipped to $74 a barrel for WTI crude. Brent crude has dropped from above $80 a barrel, its three-year high. The yellow metal gained some ground after declining nearly a percent on the surge in the dollar.