US Dollar Dips as Treasury Yields Ease Lower, Economic Recovery Optimism Priced in
Early on Tuesday, the US dollar dipped to the lowest level seen in nearly two weeks against other major currencies as US Treasury yields weakened even as the economy is set to post a faster than expected recovery. At the time of writing, the US dollar index DXY is trading around 92.65.
During the previous session, the dollar index lost around 0.4% of its value after trading bullish through the past several weeks on rising optimism about the US economy recovering from the coronavirus pandemic faster than most of its peers. This helped the greenback rise to a five month high by mid of last week before easing lower.
The benchmark 10-year US Treasury yields have slipped below the 1.7% level in early trading, after having risen to a 14-month high over the past few sessions. With strong economic data rolling in from the US, a dip in Treasury yields indicates that the optimism surrounding US economic recovery appears to have already been priced in among traders.
Meanwhile, the risk appetite in global financial markets has received a boost on hopes that economies around the world can rebound rapidly once the pandemic comes under control with the help of the COVID-19 vaccine rollout. This sentiment has also dented the safe haven appeal of the US dollar and propelled other riskier currencies such as the AUD higher.
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