Dollar Strong, But Yields Rise: Any Inflation Signals?
The US dollar is once again the star of the FX market. The US Dollar Index (DXY) held near 98.3 in European trading on Monday (March 2), near a five-week high, as investors returned to safe havens amid geopolitical turmoil and energy surges.
The pressure was clearly felt in major currencies: EUR/USD fell to around 1.174 and GBP/USD to around 1.335.
Interestingly, the dollar also strengthened against other safe havens. USD/JPY rose to around 157.18, while USD/CHF hovered around 0.772—indicating hedging flows not only to the yen or franc, but also back to the USD.
In the bond market, the 10-year US Treasury yield edged up to around 3.97%. After initially falling due to the safe haven push, the yield reversed as the market began to calculate the inflationary impact of expensive energy—which could complicate the Fed's rate cut window.
Going forward, traders' focus will be divided into two: geopolitical headlines (which dictate the "risk-on/risk-off" context) and this week's series of US data (ISM, labor data, and NFP) that could shift interest rate expectations—and automatically change the dollar's direction.
Source: Newsmaker.id