Forex Top Team

Will rising U.S. Treasury yields cause the dollar to strengthen?

“The USD/JPY has been trading in the upper 149 yen range. Yesterday, the USD/JPY reached 149.94 yen in the market, but during the morning session of the Tokyo market, it was pushed down to 149.67 yen due to profit-taking sales. However, it has since maintained a relatively firm performance. The yield on the U.S. 10-year Treasury note rose above yesterday’s levels. It exceeded the significant 4.95% threshold before noon and continued to rise in the afternoon, reaching the 4.96% range, which provided support for the dollar. However, yields on Japanese government bonds also rose in the afternoon, moving from the 0.81% range to the 0.84% range.

The Nikkei average fell more than 500 yen, and the Hang Seng Index in Hong Kong dropped by more than 2%, leading to risk aversion and yen buying, which has also kept a lid on the upside for USD/JPY. Nevertheless, the trend still appears to be upward. The rise in U.S. bond yields is expected to support the dollar, and a breakout around the 150 yen level is anticipated.

EUR/USD traded in a narrow range in the low 1.05 range during the Tokyo market. If the strong U.S. dollar trend continues, breaking below 1.05 is a possibility. Caution should be exercised regarding downward risks.”

The rise in U.S. bond yields seems to be ongoing, and while it may appear to be reaching its limit, strong U.S. economic indicators continue to drive it higher. Today, the focus is on the movement of the U.S. dollar after the release of the Philadelphia Fed Manufacturing Index.