Less Demand for Safe Havens Weighs on the US Dollar Index


May. 31 2018, Updated 8:42 a.m. ET

US Dollar Index

After gaining in the first two trading days this week, the US Dollar Index declined on Wednesday. Carrying forward the weakness, the US Dollar Index opened on a weaker note on May 31. The US Dollar Index was trading with weakness at one-week low price levels in the early hours.

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Market sentiment

The US Dollar Index moved higher on Tuesday amid increased demand for safe-haven assets due to escalating political tensions in Italy. However, the US Dollar Index lost strength on Wednesday amid the euro’s rebound and weaker-than-expected economic data. According to the Bureau of Economic Analysis, the US GDP recorded quarterly growth of 2.2% in the first quarter, which is less than the forecast of 2.3% growth. According to Automatic Data Processing (ADP), the non-farm employment change in May was 178,000—less than the expected reading of 186,000.

Decreased concerns about Italy’s political situation lowered the demand for safe-haven assets and weighed on the US Dollar Index in the early hours on Thursday. At 5:25 AM EST on May 31, the US Dollar Index was trading at 93.84—a drop of 0.34%.

US Treasury yields

US Treasury yields started to rebound on Thursday. Decreased anxiety about political uncertainty in Italy weighed on the bond market. The yields move opposite to the movement in the bond market. Below are the movements in Treasury yields as of 5:25 AM EST on May 31.

  • The ten-year Treasury yield was trading at 2.875—a gain of ~1.1%.
  • The 30-year Treasury yield was trading at 3.038—a gain of ~0.67%.
  • The five-year Treasury yield was trading at 2.710—a gain of ~1.4%.
  • The two-year Treasury yield was trading at 2.436—a gain of ~1.0%.

The iShares 20+ Year Treasury Bond (TLT) declined 0.67%, while the ProShares UltraShort 20+ Year Treasury (TBT) and the ProShares UltraPro Short 20+ Year Treasury (TTT) gained 1.2% and 2.2%, respectively, on Wednesday.

Next, we’ll discuss how commodities performed in the early hours on May 31.


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