Rising US Yields Drive Demand for Safe Havens, Boosting Dollar

The dollar surged to a two-week high against other major currencies on Thursday, driven by a sharp decline in Treasuries that boosted U.S. yields and increased demand for safe-haven assets.

Following a 15-basis point jump in long-term Treasury yields, the dollar reached a two-week peak against the euro and continued its rebound from a two-month low against the pound. The bond market turmoil has rattled investors, leading to a global slide in equities and a rush to safer assets.

The dollar index, which measures the currency against six major peers, hit its highest level since May 14 at 105.15, following a 0.5% gain in the previous session. The euro fell to $1.0796, its lowest level since May 14, while the pound dropped to $1.2696 after hitting $1.2801 earlier in the week.

Meanwhile, the yen, which had been steadily declining, rebounded from a four-week low to trade at 157.505 per dollar. The Japanese currency’s recent weakness has prompted speculation of intervention by the Ministry of Finance and Bank of Japan.

Expectations for Federal Reserve interest rate cuts have diminished due to signs of persistent inflation, including a surprise increase in consumer sentiment data. Revised U.S. GDP figures are expected later in the day, with the release of the Personal Consumption Expenditures price index on Friday.

Analysts warn that the bond market turmoil could prompt further intervention by the Bank of Japan, as concerns grow about the impact on broader markets. The upcoming economic data will be closely watched for clues on future monetary policy decisions.