The dollar index (DXY00) on Monday rallied by +0.95% to a new 20-year high. The dollar shook off Monday’s -9 bp decline in the U.S. 10-year T-note yield to 2.99% and moved higher on carry-over support from last Friday’s stronger-than-expected U.S. payroll report of +372,000, which indicated continued strength in the U.S. economy despite the Fed’s interest rate hikes seen thus far.
EUR/USD (^EURUSD) Monday fell by -1.31% to a new 20-year low. The euro continues to suffer from the ECB’s dovish monetary policy relative to the Fed. The euro also continues to suffer from Europe’s energy crisis as it seeks to disengage from Russian oil and gas.
USD/JPY (^USDJPY) Monday rallied +1.05% on dollar strength. The yen was undercut after the ruling LDP party in Sunday’s election extended its upper house majority. That will allow Prime Minister Kishida to continue supporting the BOJ’s highly accommodative monetary policy and its attempt to avoid the interest rate hikes being seen in most of the rest of the world. Japan was shocked late last week when former Japanese Prime Minister Abe was assassinated in the city of Nara while giving a campaign speech.
August gold (GCQ22) Monday fell by -10.60 (-0.61%), and September silver (SIU22) fell by -1.04 (-0.54%). Gold consolidated mildly above last Friday’s 9-1/2 month low. Precious metals fell on Monday’s sharp rally in the dollar index to a new 20-year high.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the omicron Covid variant on the global economic recovery. China has been slowly dropping Covid lockdowns, but elevated Covid cases may keep the country from fully reopening. China has launched mass testing for nine districts in Shanghai after detecting new Covid infections, and 66 new Covid infections were reported in Jiangsu province last Tuesday, the second-biggest province for China's economic output. Also, the 7-day average of new U.S. Covid infections recently rose to a 1-month high of 119,644.
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