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US Dollar Hits a One-Month Low as Bond Yields Slump; Gold, Yen Remain Bid

US Dollar Hits a One-Month Low as Bond Yields Slump; Gold, Yen Remain Bid

Nick Cawley, Senior Strategist

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US Dollar (DXY) Price and Chart Analysis

  • The US dollar trades at a one-month low.
  • Market expectations for future US rate hikes have been pared back sharply.
  • Safe haven assets remain bid as markets shun risk.

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Most Read: US Dollar Slides as SVB Repercussions Stalled by the Fed and the Treasury Department

Short-dated government yields are falling sharply Monday as traders pile into these safe-haven assets after two US were shuttered over the weekend. While the Fed’s backstop action, protecting depositors, was seen as a positive move, financial markets currently have a bad case of the jitters. Safe-haven assets including USTs, Bunds, gold, and the Japanese Yen are all strongly bid, while indices continue to sell off.

The yield on the 2-year US Treasury has fallen by around 80 basis points in the last three sessions….

US Treasury 2-Year Yield

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…..while the German 2-year Schatz has also seen its yield fall sharply.

German 2-Year Schatz Yield

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Gold, another safe-haven asset class made a five-week high earlier in the session, just a handful of dollars off $1,900/oz level….

Gold Daily Price Chart

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…while the Japanese Yen, seen as a safe currency in times of market stress, broke below 133.00 against the US dollar before rebounding slightly.

USD/JPY Daily Price Chart

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All of the above markets are now starting to trade at extreme levels, using the CCI indicator, and may recover part of their current moves.

The US dollar is moving lower on the back of falling US Treasury yields and a growing sense that the Federal Reserve may pare back or even delay further rate hikes. Last week the market had been fully pricing in a 50bp hike at the March 22 FOMC meeting, while today a 25bp hike is expected with a chance of no rate hike at all now being considered.

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Tomorrow’s US inflation release will be closely watched by the market, but the Fed will be watching market conditions closely before they make any decision. The Fed is in now in a blackout period when no Fed members can air their views and this will make the next few days potentially more volatile.

US Dollar (DXY) March 13, 2023

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Chart via TradingView

What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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