USD: Dollar to remain weak as 10-year yield is still the key – MUFG
|Analysts at MUFG Bank point out that the correlation between the US dollar and US bond yields has strengthened. They see a limited impetus for higher yields, so they consider the US Dollar is set to remain weak.
Key Quotes:
“The 10-year UST bond yield still matters. The FX/UST yield correlation has actually become more significant over the past month, which is somewhat surprising given the UST 10yr yield has traded in a narrow range. But our analysis across G10 FX with UST 10yr yields based on daily % changes over a 30-day window shows every FX pair is more strongly correlated than a month ago.”
“The most robust correlation remains USD/JPY while GBP and CAD show the weakest correlations. With UK-specific supportive factor compelling in our view, we expect that correlation to remain weak. If 10yr UST yields are set to move higher, the differing correlations if sustained point to downside potential in EUR/GBP. “Substantial further progress” needed for the FOMC to alter the pace of purchases has certainly been achieved following today’s jobs report pointing to 10-year yield downside risks that leaves the dollar vulnerable to the downside.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.