US Treasury yields hit the highest level since February 2020
The US dollar index extends the upbeat momentum for the third session in a row on Friday as risk aversion persists in the global financial markets. US Treasury yields keep the march north, targeting 1.60% and hitting the highest level since February 2020, after Federal Reserve’s Powell showed no concerns regarding the persistent climb in yields.
Now, some economists forecast the 10-year Treasury yield to jump to 2% by the end of this year, citing rising investor concerns over the probability of higher inflation in the next months. Besides, the greenback derives support from the outperformance of the US economy along with the solid pace of the vaccine rollout as compared to other counties and regions.
As for the EURUSD pair, the selling pressure could intensify if the European Central bank decides to increase its weekly bond purchases. If so, the common currency will see further losses. The pair dipped to late-November lows around 1.1925 in recent trading, now threatening the 1.1900 handle.
Meanwhile, USDJPY rose to the 108.40 zone for the first time since early-June 2020 on Friday. Yield differential dynamics is expected to continue driving the pair higher despite the overbought conditions. If the dollar confirms a break above the 108.00 area on a daily and weekly closing basis, a rally towards the 110.00 barrier cannot be ruled out.
The ongoing rally in the dollar keeps gold prices under selling pressure. The precious metal slid to fresh nine-month lows around $1,1687 earlier in the day before trimming gains slightly. In the short-term, the bullion needs to regain the $1,700 figure in order to avoid another sell-off.
Later today, traders will shift focus to the US labor market data. The US is expected to have created 182,000 jobs last month. If the report surprises on the upside, the dollar could extend the rally before the markets close for the weekend.