The dollar strengthened as markets weighed a hawkish Fed, lower oil prices and easing geopolitical tensions, while the 10-year Treasury yield slipped after briefly touching 4.5% overnight.
U.S. Treasury yields moved lower as U.S.-Iran peace talks continued and crude oil futures fell 3%, easing geopolitical pressure in energy markets even as the dollar strengthened. The Fed’s hawkish tone last week reinforced expectations of at least one and possibly two interest-rate increases this year, a backdrop that Naga.com’s Frank Walbaum said could keep the dollar’s spot price sensitive to near-term rate-hike risk. Lower oil prices also reduced inflation fears and weighed on yields, while the Fed’s commitment to keep fighting inflation reassured markets that rates could fall after any further tightening, Walbaum said. The WSJ Dollar Index rose 0.3%. The 10-year Treasury yield was at 4.416% after reaching 4.5% overnight, versus 4.493% the previous day, while the two-year yield fell to 4.168% from 4.191%. Attention later in the day was on U.S. May new home sales data due at 10 a.m. ET, with a Wall Street Journal survey forecasting a 1.6% increase after a 6.2% contraction in April. Bannockburn’s Marc Chandler said dollar moves reflected the unwinding of short USD positions, while yields were being shaped by U.S. economic resilience.