King Dollar is back again as bond yields rally
Head of Investment Research
King dollar shines again. The world’s reserve currency advanced 3% so far in 2021, on the back of rising US bond yields, vaccine rollouts, and the expectations for a faster reopening of the US economy as it emerges from the pandemic.
The bond yields climbed to a one-year high across all maturities, increasing the demand for the US currency. Investors have already priced in higher inflation figures, driven by the massive fiscal and monetary packages, and the higher commodities prices.
The DXY dollar index rose near the 92.50 marks, its highest level since late November 2020. The dollar gained almost 500 pips against Euro, trading near the 1.18 mark, while it rose to a 9-month high against the safe-haven currencies of the Japanese Yen and Swiss Franc.
The greenback has also managed to recover some losses against commodity-linked currencies such as the Australian and New Zealand dollars, and emerging market currencies of Turkish Lira, Brazilian Real, and Chinese Yuan.
The continuing rally in the dollar and bond yields have also pressured the price of Gold below 1.700 dollars per ounce, as they increase the opportunity cost of holding the non-interest precious metal.
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