USD: Haven appeal under pressure – DBS
DBS Group Research economist Philip Wee argues that the US Dollar’s traditional safe-haven role is being undermined as it failed to benefit from risk aversion despite higher Oil prices and geopolitical tensions. He highlights weak US labour data, monetary policy divergence versus Europe and the UK, political instability in Washington, and rising US fiscal concerns as key headwinds for the Dollar.
Haven status challenged by multiple headwinds
"In a notable departure from trends after the Israel-US-Iran war broke out, the USD failed to capture haven flows last Friday (March 6) despite Brent crude oil prices surging above USD90/barrel amid the escalating conflict."
"The negative surprise in February’s US nonfarm payrolls (-92k actual vs. +55k consensus) broke the resilient US labour market narrative that underpinned the Fed’s extended pause."
"In contrast, markets erased expectations of two Bank of England rate cuts and priced in two European Central Bank rate hikes this year, reviving a trade on monetary divergence against the greenback."
"Collectively, these upheavals signal a state of flux within the executive branch, eroding the predictable governance that underpins the USD’s haven status."
"Hence, the USD could come under pressure if the narrative behind higher US Treasury yields shifts from inflation to fiscal sustainability concerns."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Dow Jones Industrial Average bounces on Iran's latest Hormuz offer
U.S. stocks opened higher and fluctuated, the Japanese yen rebounded more than 1% intraday, 10-year U.S. Treasury yields broke above 5.22% again, and U.S. crude oil once fell nearly 3%.
After the release of U.S. consumer confidence data, the S&P and Nasdaq turned negative, while the Dow is poised to break a three-day losing streak but is set for a fourth consecutive weekly decline. Meta pulled back, falling more than 3% during the session. The U.S. 10-year Treasury yield surpassed 5.22% again, marking a new high for the third day in a row since 2007, while the 30-year yield reached its highest level since 2004. The yen/dollar pair surged 1.2% intraday, as Japanese and U.S. officials successively signaled concerns over the weak yen. Expectations for a diplomatic resolution between the U.S. and Iran are rising, halting crude oil's two-day climb.
US Treasury volatility surges, triggering alarms! BofA’s Hartnett warns of rising deleveraging risks as higher yields become main threat to the market
Bank of America strategist Michael Hartnett warns that the recent sharp rise in volatility in the US bond market is increasing the risk of broader deleveraging in financial markets.
U.S. diesel prices surge 83% this year! Apollo Chief Economist warns: Cost pass-through may make core inflation more stubborn, Federal Reserve can't ignore it
Torsten Slok, Chief Economist at Apollo Global Management, has warned that the inflation threat posed by the surge in U.S. diesel prices to historic highs may be more serious than the Federal Reserve currently realizes.
Crypto prices
More
