Treasury Yields and Stock Markets Helped to Boost Dollar

The world’s reserve currency held firmer on March 19, as it benefited from higher Treasury yields as well as dropping stock markets, as investors digested the Federal Reserve’s pushback against expectations of any early interest-rate hikes. It is worth mentioning that the dollar index was slightly higher following a 0.5% jump on Thursday.

Interestingly, the benchmark U.S. 10-year yield ascended to a more than one-year peak of 1.754% overnight before easing to 1.706%. Importantly, Asian stocks followed Wall Street lower.

As a reminder, the yen dipped briefly after the Bank of Japan’s decision. The central bank widened its target band for the benchmark yield. This decision was in line with market expectations.

This week, the Federal Open Market Committee (FOMC) promised to press on with aggressive monetary stimulus. According to the information provided by FOMC, a near-term spike in inflation would prove temporary amid their projections for the strongest U.S. economic growth in nearly 40 years.

Interestingly, the greenback was flat at 108.895 yen, adding to small gains overnight.

After the Bank of Japan’s move to broaden the target band for the 10-year Japanese government bond yield to 25 basis points around 0% from 20 basis points in the past. It is worth mentioning that the yen briefly fell past 109 per dollar, before retracing all of that move.

Dollar and other major currencies on Friday

However, it is not an easy day for another major currency. Importantly, the euro was slightly weaker at $1.1915, extending Thursday’s 0.5% tumble.

People should keep in mind that AstraZeneca vaccinations are poised to restart in Germany. France and other European countries. However, Paris went into a month-long lockdown and this decision affected the region’s growth outlook.

Interestingly, the British pound dropped 0.1% to $1.3913 after weakening 0.3% a day earlier. As a reminder, the Bank of England warned the outlook for Britain’s recovery remained unclear.

It is no secret that the coronavirus pandemic created a lot of challenges even for the biggest economies. Millions of people across the world are struggling to deal with financial problems, as many of them lost their jobs. The situation in many countries is quite complicated due to various factors.

Moreover, it won’t be easy to return to pre-coronavirus results in a short period of time. For example, it could take years to revive the aviation industry. As a reminder, the pandemic decimated the once-thriving industry. It is not surprising that countries are willing to do whatever it takes to improve the situation.