The dollar surged to a two-week high against major currencies on Thursday as a result of a rout in Treasuries. This increase in demand for safe haven assets, combined with higher U.S. yields, boosted the appeal of the dollar. The bond market turmoil has caused global equity markets to slide, prompting investors to flock to safer assets.
The dollar index, which measures the currency against six major counterparts, including the euro, sterling, and the Japanese yen, reached its highest level since May 14 at 105.15. This follows a 0.5% gain in the previous session. The euro fell to $1.0796 for the first time since May 14, while sterling declined to $1.2696 after hitting $1.2801 earlier in the week. On the other hand, the yen saw an increase from its four-week low to trade at 157.505.
Market Speculation and Interventions
Market players suspect that the recent depreciation of the yen may have been a result of interventions by the Ministry of Finance and Bank of Japan. The Japanese currency has been on a downward trend, approaching the 34-year low of 160.245 from a month ago. Despite this trend, expectations for Federal Reserve interest rate cuts have been reevaluated due to signs of inflation remaining stable, as evidenced by an unexpected increase in consumer sentiment data.
Traders are eagerly awaiting the release of revised U.S. GDP figures later in the day, followed by the pivotal release of the Personal Consumption Expenditures (PCE) price index on Friday. The PCE index is considered the Federal Reserve’s preferred measure of inflation and could provide further insights into the state of the economy.
The recent surge in the dollar can be attributed to the turmoil in the bond market, with investors seeking refuge in safer assets. Market participants are closely monitoring economic indicators for clues on the future trajectory of interest rates and inflation. The currency market remains volatile, and decisive shifts in market sentiment can be expected in the coming days.