U.S. Dollar’s Once-Solid Link to Bond Yields Is Breaking Down
- Greenback still near level from year-end even as yields rise
- Demand for option hedges against stronger greenback waning
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The dollar is starting to decouple from the Treasury yields that it tracked so closely last year, adding to signs that the bulk of the currency’s windfall from higher rates has already passed.
Two-year U.S. yields surpassed 0.94% on Tuesday, hitting levels last seen before the pandemic, as money markets moved toward pricing in four rate increases from the Federal Reserve this year. Yet the Bloomberg Dollar Spot Index has failed to budge much above a six-week low seen at the end of 2021.