The U.S. dollar strengthened on Monday for the third day
The U.S. dollar strengthened for the third day in a row on Monday due to rising U.S. Government bond yields. The dollar index, which reflects the exchange rate against the six major currencies, rose to three-week highs on January 11.
“As is often the case, the dynamics of debt markets have been the basis for the reversal. Long-term U.S. Government bond yields have been rising steadily since the beginning of last week, rising from 0.90% to 1.14% on 10-year Government bonds, the highest level since March last year.
This rally is due to reinforce hopes for huge incentives. They typically increase inflation expectations and increase government bond yields,” notes fxpro’s team of analysts.
Investors are starting to worry about the rise of US government bonds, writes Finanz. On the news that Democrats have gained full control of Congress – the performance of 10-year-old U.S. treasuries jumped to a record for six months and reached 1.14% a year for the first time since March. Joe Biden is preparing another “trillions of dollars” aid package for the real economy, which the U.S. Treasury Department will have to finance with debt, while the U.S. Federal Reserve has not yet shown a willingness to buy more government securities.
101 000 Investors preparing for a short-term strengthening of the dollar. The market will buy U.S. currency in anticipation of the arrival of congressional Democrats who have promised endless incentives, writes ProFinance.
“The dollar is heavily sold out, in such a situation sooner or later there will be a correction. It’s inevitable,” said Matt Mali, senior market strategist at Miller Tabak. “The dollar is ready for a real bounce where you can make good money. The currency will continue to rise for weeks, if not months.”
“The strengthening of the US currency and the growing demand for domestic government bonds is a warning sign for the Russian ruble, which on Monday was aimed at 75 rubles / $. This could be the start of a new strong trend of the Russian currency’s decline, cutting off positive expectations for the coming months,” notes fxpro’s team of analysts.