Dollar Falls Back as T-note Yield Slides

The dollar index (DXY00) on Monday fell by -0.17% as the 10-year T-note yield fell by -7 bp to 2.76%, undercutting the dollar’s interest rate differentials.  T-note yields fell back after last Friday’s +14 bp jump on the strong U.S. payroll report.  

The dollar also fell back on some profit-taking after last Friday’s +0.88%  rally that occurred after the stronger-than-expected U.S. payroll report of +528,000 suggested that the Fed will need to continue to tighten monetary policy aggressively.

The dollar Monday had underlying support from liquidity demand as stocks faded from an early rally. The dollar also saw some safe-haven demand on continued Taiwan tensions after China’s military Monday announced new military exercises around Taiwan focused on antisubmarine and air-to-sea strikes. The previous 4-day set of exercises ended Sunday.  China is keeping up the pressure on Taiwan after House Speaker Pelosi’s visit to Taiwan last week. 

EUR/USD (^EURUSD) on Monday rose slightly by +0.11%, mainly due to dollar weakness.  USD/JPY (^USDJPY) on Monday rose slightly by +0.07%.

The yen in the past several sessions has seen support from capital repatriation demand from Japanese investors who are nervous about Taiwan tensions and the fact that China last week launched missiles into Japan’s claimed economic zone.

October gold (GCV22) Monday rallied by +13.80 (+0.78%), and September silver (SIU22) rallied by +0.772 (+3.89%).  Precious metals saw support Monday from the mildly weaker dollar and the decline in the U.S. T-note yield.  Silver saw carry-over support from last Friday’s strong U.S. payroll report, which had positive implications for U.S. economic growth. 

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