- USD down as treasury yield curve flattens
- Sign of risk-off in equities also keeping USD bulls at bay
Dollar Index (DXY) is losing altitude in Asian trade, tracking the flattening of the treasury yield curve and moderate risk aversion in the equity markets.
As of writing, DXY is trading at 94.40; down 0.33 percent on the day.
The offered tone around the USD may have strengthened as the difference or the spread between the US 10-year treasury yield and the 2-year treasury yield continues to narrow. An uptick in the spread is referred to as a steepening of the yield curve and is considered positive for the USD. Meanwhile, falling yield spread means flattening of the yield curve and is considered bearish for the US dollar.
Currently, the spread stands at 75 basis points (bps). A break below the Oct low of 74.8 bps would mean the yield curve is flattest since 2007. A flatter yield curve usually means falling inflation expectations or slowdown in the economic activity.
Meanwhile, 0.30 percent drop in the S&P 500 futures could be hurting the USD as well.
Kathy Lien from BK Asset Management writes - " After the rate decision, rate hike expectations for December increased from 82.8% to 92.3%. Many sources are also saying that Jerome Powell will be President Trump's pick for Fed Chair. As the market has fully discounted a Yellen departure, as long as Trump picks Powell or Taylor and not someone from left field, the dollar will rise as the uncertainty recedes. The announcement is expected on Thursday along with the Republicans' tax reform bill, which was delayed from today. Unless there are any unexpected surprises on either front, the dollar should rise on these announcements."
Dollar Index Technicals
A break below 94.28 (10-DMA) would expose support at 94.00 (zero figure) and 93.80 (Oct. 18 high). On the other hand, a move above 94.651 (previous day's low) would open up upside towards 94.80 (daily high) and 95.00 (zero levels).
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.