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US Dollar Index and US Treasury Yields Were Weaker

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US Dollar Index

The US Dollar Index fell to ten-month low price levels in the second week of July and started the week ending July 21 on a weaker note. Except for July 19, the US dollar was weak the rest of last week.

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Market sentiment

The US Dollar Index lost strength in the middle of July after Fed Chair Janet Yellen’s dovish comments. She said that the Fed will stick to gradually tightening monetary policy by slowly shrinking its balance sheet. The US dollar fell much lower after weaker-than-expected economic data in the middle of the month. The data supported Yellen’s dovish stance. Last week, the US Dollar Index fell much lower on July 18. The market sentiment was dented after Congress repealed the healthcare bill.

An additional weakness was added to US Dollar Index on July 20 when Bloomberg reported about Robert Mueller’s investigation on President Trump. As a part of the U.S. Office of Special Counsel’s investigation into President Trump’s ties to Russia in the 2016 presidential election, Mueller was reported to be expanding his investigation to President Trump’s business transactions. Last week, the US Dollar Index was stable on July 19 due to short covering on the market ahead of the ECB’s interest rate decision and press conference.

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US Treasury yields

Similar to the US Dollar Index, US Treasury yields were weaker in the week ending July 21. Weaker-than-expected retail sales and inflation data released on July 14 made US Treasury yields start last week on a weaker note. Issues with the new healthcare bill and concerns about the investigation on President Trump’s business transactions were the main drivers behind the fall in US Treasury yields last week. Concerns about inflation’s outlook amid dovish comments from central banks increased the demand for government bonds and pulled yields lower. Treasury yields move opposite to movements in the bond market.

Movement in Treasury yields

  • The ten-year Treasury yield closed at 2.238—a fall of ~4.1%.
  • The 30-year Treasury yield closed at 2.809— a fall of ~3.8%.
  • The five-year Treasury yield closed at 1.803—a fall of ~3.5%.
  • The two-year Treasury yield closed at 1.344—a fall of ~1.2%.

The iShares 20+ Year Treasury Bond ETF (TLT) rose 1.9%. The ProShares UltraPro Short 20+ Year Treasury ETF (TTT) and the ProShares UltraShort 20+ Year Treasury ETF (TBT) fell 5.6% and 3.8%, respectively, in the week ending July 21.

In the next part, we’ll discuss how commodities performed last week.

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