Dollar Index hit 3-month high above 91.00
|- The market's love affair with the greenback continues in Asia, courtesy of rising treasury yields.
- Yield differentials widen in the USD-positive manner.
The dollar index, which tracks the value of the greenback, against the basket of the currencies, rose to 91.08 in Asia - the highest level since January 12, as the 10-year treasury yield remains on the hunt for a big break above the 3 percent mark.
Focus on yield differential
The traditional FX and bond market correlations are back in play. For instance, the EUR/USD pair fell to 1.2184 in Asia, its lowest level since March 1 as the 10-year US-German yield spread stands at a multi-decade high of 234 basis points. On similar lines, GBP, AUD, JPY and other FX majors have depreciated against the greenback in the last three trading days, courtesy of the widening yield differential.
Further, risk reversals show increased demand for USD calls (bullish bets). So, it appears the dollar rally has legs.
It is worth noting that yield differentials have been rising in the USD-positive manner since Q3 2017, still, the USD was offered across the board as markets priced-in faster tightening elsewhere (Eurozone, Japan) and a hard landing in the US.
Dollar Index Technical Levels
As of writing, the DXY is trading at 90.94. Acceptance above 90.98 (Jan. 18 high) would open up upside towards 92.64 (Jan. 9 high) and 93.00 (psychological level). On the downside, a convincing break below 90.94 (March 1 high) would shift risk in favor of a drop to 90.57 (Feb. 8 high) and 90.00 (psychological level).
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