Dollar Slips, Long-Term Yields Remain High as Oil Trims Gains
The Bloomberg Dollar Index weakened 0.1% at the start of the week, following a 1.2% rally last week—its biggest weekly gain in more than two months. The dollar's move came as the oil rally began to tail off, while long-term government bond yields held near multi-year highs across various countries.
Brent crude is still trading around 1% higher at US$110 per barrel after briefly rising as high as 2.5%. US President Donald Trump has renewed pressure on Iran to reach a deal to end the war, keeping the market sensitive to energy risks that could impact inflation.
In the bond market, the 30-year US Treasury yield held steady near its highest level since 2023. In Japan, longer-dated bond yields surged more sharply, with the 30-year yield rising by around 20 basis points to its highest level since its initial issuance in 1999. The yen was the only G10 currency to weaken against the dollar, with USD/JPY rising 0.1% to 158.87.
On the domestic policy front, Japanese Prime Minister Sanae Takaichi called for a supplementary budget to address rising commodity prices, marking a shift from her previous view that such a measure was unnecessary. In the UK, GBP/USD rose 0.4% to 1.3375 after falling 2.2% last week, although speculative interest appeared to be skewed defensively after hedge funds and asset managers increased their positions on bearish pound options amid rising political risks.
The combination of persistently high oil prices, tight longer-dated yields, and selective FX movements suggests the market remains focused on two key channels: energy-driven inflation risks and the resilience of interest rate policy. The variables that will most determine the next direction are oil price stability, movements in long-dated US and Japanese yields, and UK political developments that affect sterling's risk premium.
Source: Newsmaker.id
