USD Spike on Rising Treasury Yields Rising above 1.5%, NASDAQ Falls
The USD spiked in the early N.Y. session on Feb 15, registering gains versus the majors, as treasury yields continue to rise. Subsequently, Emerging Market currencies posted notable losses. Meanwhile, the VIX reading swung to fear, and major indices led by NASDAQ and the S&P 500 declined.
Investors expect the U.S. government to continue borrowing more, causing Treasury yields to rise. As expected, their demand is forcing return on investment higher. At over 1.5 percent, investing in these secure government-backed notes returns more than dividend yields of the S&P 500. As a result, the USD is whipsawing, pushing higher and reversing its eight-month low against both the major and exotic pairs. Meanwhile, the spike in treasury yields and the shift to value stocks saw the tech-heavy NASDAQ and safe-havens—especially gold, decline from this week's peaks in trend continuation.
Impact on the USD:
Bullish. Jerome Powell is confident; inflation won't spike as analysts project. On the other hand, the stock market might be overheating, ripe for a correction. Rising yields may be the triggers that may pump the greenback to new intra-month levels after being battered for over nine months.
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