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US Dollar Is Strong, Market Risk Weighs on Treasury Yields

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May. 23 2018, Updated 9:22 a.m. ET

US Dollar Index

After closing higher last week, the US Dollar Index started this week on a mixed note and traded with mixed sentiment in the first two trading days. The US Dollar Index opened Wednesday on a stronger note and was trading at 2018 highs in the early hours.

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Market sentiment

The US Dollar Index traded with decreased upward momentum in the past two days amid increased profit-booking. On Wednesday, there was strength in the US Dollar Index ahead of the Fed’s meeting minutes. The minutes are scheduled to be released at 2:00 PM EST. The market observes the Fed minutes carefully to get clues about the pace of interest rate hikes this year. Amid strong economic releases, rising bond yields, and higher inflation, the market expects an increase in the pace of the Fed’s interest rate hike. The market is also looking forward to May’s manufacturing and services PMI data that are scheduled to be released at 9:45 AM EST today.

At 5:20 AM EST on May 23, the US Dollar Index was trading at 93.79—a gain of 0.19%.

US Treasury yields

After a brief rebound on Tuesday, US Treasury yields started Wednesday on a mixed note and moved lower as the day progressed. President Trump’s comments about US-China trade talks and weak Eurozone data decreased the global risk appetite. Increased caution in the market boosted US bonds and weighed on Treasury yields in the early hours on Wednesday.

Below are the movements in Treasury yields as of 5:30 AM EST on May 23.

  • The ten-year Treasury yield was trading at 3.017—a fall of ~1.6%.
  • The 30-year Treasury yield was trading at 3.171—a fall of ~1.2%.
  • The five-year Treasury yield was trading at 2.852—a fall of ~1.6%.
  • The two-year Treasury yield was trading at 2.561—a fall of ~1.2%.

The iShares 20+ Year Treasury Bond (TLT) declined 0.15%, while the ProShares UltraShort 20+ Year Treasury (TBT) and the ProShares UltraPro Short 20+ Year Treasury (TTT) gained 0.26% and 0.47%, respectively, on Tuesday.

Next, we’ll discuss how commodities performed in the early hours on May 23.

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