The US dollar is making gains against popular safe haven currencies like the Japanese yen and the Swiss franc, touching multi-month highs on the back of strengthening US Treasury yields in anticipation of Fed Chair Powell’s speech later today. At the time of writing, the US dollar index DXY is trading around 91.18.

The US dollar is holding strong against other major rivals as well as markets await Powell’s comments on the recent volatility seen in government bonds and any possible observations about the economic outlook ahead of the Fed’s next week around the mid of the month. While the strengthening in bond yields can support the greenback’s bullishness against other safer currencies, it could cause it to lose ground to riskier, commodity currencies over hopes of economic recovery and an overall improvement in the market sentiment.

The benchmark 10-year US Treasury yields continue to hold above 1.4%, even as markets await developments on the next pandemic relief package. Expectations that more stimulus and monetary easing could spike inflation even as they help with economic recovery have driven significant volatility in Treasuries, which also spilled over into equities and forex markets.

Analysts forecast additional weakness in the Japanese yen as the US economy appears to be recovering at a faster pace than that of Japan. Even as the AUD and NZD experience slight weakness, the outlook for both these commodity currencies remains bullish as their economies are recovering from the pandemic-inflicted damage at a rapid pace.