U.S. dollar and Treasury yields extend gains across the board

Vrasidas Neofytou
Head of Investment Research

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The U.S dollar and bond yields have continued to rise in anticipation of the Federal Reserve tightening monetary policy at a time when rising inflation and Russian aggression harmed the global economic growth outlook.

Following concerns regarding a likely downturn in the global economy due to the war in Ukraine, investors have flocked to the safety of the dollar and U.S. Treasuries, which have long been considered safe havens during times of political and economic turmoil.

The DXY dollar index surged as high as 101 this week, with bullish momentum and outperformance by the US economy indicating more advances toward the 2020 pandemic-panic highs of a 103.

In the bond market, yields on the benchmark 10-year U.S. Treasury note have risen to near 2,90 percent, their highest level since December 2018, boosted by the Federal Reserve's intention to raise interest rates.

Since the Ukraine war, energy uncertainties, and the dovish European Central Bank have posed a threat to the Eurozone's economic outlook, while the Euro has traded near a 2-year low of 1,07 to the dollar.

The Japanese yen has also experienced significant losses in recent weeks, falling to a 20-year low against the dollar, owing to discrepancies in bond yields between the US and Japan, as well as the Bank of Japan's dovish stance.

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