Dollar sees notable rise supported by higher yields on US Treasury bonds
(MENAFN) The dollar saw a notable rise on Tuesday, largely supported by the higher yields on US Treasury bonds. This surge in the dollar was accentuated by the sharp decline of the Japanese yen, which fell to its lowest levels since 1986. According to a UK-based news agency, the benchmark 10-year Treasury yields increased by approximately 14 basis points, reaching 4.479 percent, signaling strong investor demand for US government debt.
Market analysts have linked this movement to the rising expectations of Donald Trump securing a win in the US presidential election. Such a victory is anticipated to bring about policies favoring higher tariffs and increased government borrowing. These economic measures are expected to stimulate demand for US assets, subsequently driving up Treasury yields and providing robust support for the dollar.
As the dollar gained strength, the euro saw a retreat from its slight rise. The initial results from the first round of the French election appeared to be largely in line with opinion polls, leading to a stabilization of the European currency at $1.0735. This suggests that market participants had already priced in the expected outcomes of the French election, resulting in minimal immediate impact on the euro.
Meanwhile, the Japanese yen continued its significant decline, falling to 161.72 against the dollar on Monday. This marked its weakest level in nearly 38 years, driven primarily by the substantial interest rate differential between the United States and Japan. The wide gap in interest rates has made the yen less attractive to investors seeking higher returns, leading to its continued depreciation. By Tuesday in Asian trading, the yen was holding at 161.55 against the dollar, indicating a persistent weakening trend.
Overall, the combination of higher US Treasury yields and geopolitical factors, such as the US presidential election and the French election, has created a dynamic environment in the currency markets, with the dollar strengthening and the yen reaching historical lows. The movements in these currencies highlight the complex interplay of political expectations, interest rate differentials, and investor sentiment in shaping global financial markets.
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