Has the Dollar Index Reversed to a Decline?
The dollar in the foreign exchange market is correcting some of the gains of the past three months. The dollar index has retreated below 103 after touching 105 a week ago. The retreat of the US currency goes against a wide range of peers and several asset classes. 10-year Treasury yields, which peaked near 3.2% last week, are still declining.
Such dynamics reflect investors’ hesitation regarding the prospects for the US economy, around which recession risks are mounting. The decline in long-term bond yields indicates investors’ doubts that the Fed will be able to raise and keep rates high for a long time, and it reduces the attractiveness of investing in the dollar.
But it is also worth noting the work of other central banks, which are closing the gap between their policy and Fed sentiment by tightening their rhetoric almost daily.
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