US Dollar Attempts Recovery Amid Rising Bond Yields and Euro Weakness
The dollar is currently experiencing a modest recovery after facing significant losses in the previous session. The dollar index has edged up by 0.17% to settle at 106.19 points during Thursday’s trading. This rebound is taking place in the absence of impactful US economic data, with support for the dollar coming from rising US bond yields and weakness in the euro due to economic developments in the Eurozone.
Rising US Bond Yields Bolster Dollar Strength
The increase in US bond yields of various maturities has provided a strong boost to the dollar. The 10-year Treasury yield climbed by 0.21% to 4.253%, the 20-year yield surged by 0.33% to 4.530%, and the yield on 30-year bonds gained 0.25% to reach 4.439%. These rises have made the US dollar a more attractive investment, leading to increased demand and contributing to its improved performance in global markets.
Euro Declines, Supporting Dollar Gains
The euro has come under pressure following the release of disappointing German inflation data, showing a 0.2% contraction on a monthly basis for November. This has raised expectations of further interest rate cuts by the European Central Bank in response to subdued inflation and slow economic growth. As a result, the euro/dollar pair fell by 0.12% during today’s trading, further aiding the dollar’s recovery.
Rate Cut Expectations Weigh on Dollar Performance
Despite the positive effects of rising bond yields and euro weakness, the dollar’s gains have been tempered by growing market expectations of a Federal Reserve rate cut. The likelihood of a 25-basis-point reduction at the Fed’s next meeting has increased to 70%, while the probability of maintaining current rates has decreased to 30%. These expectations have put downward pressure on the dollar, limiting the extent of its rebound.
Looking Ahead: Key Influences on the Dollar
With no major US economic data releases on the horizon, investors are closely monitoring for any comments from Federal Reserve officials or new data that could provide fresh direction for the dollar. Currently, the currency’s movements continue to be influenced by the interplay between rising bond yields and evolving monetary policy expectations.
Source : www.arabictrader.com