The US dollar was relatively steady on Thursday, while persistent geopolitical tensions in the Middle East continued to fuel safe-haven demand for the currency.
At the same time, elevated Treasury yields across the curve provided support.
Oil prices extended their advance to multi-week highs, stoking inflation concerns that reinforced expectations of a hawkish Federal Reserve.
Markets currently price two rate increases by year-end, supporting yields across the curve. The 2-year yield touched its highest level since February last year, while the 10-year climbed to a two-month high.
Traders will be watching for any further escalation in geopolitical tensions and how it feeds through into oil prices, inflation expectations and the path of monetary policy through year-end.
The latter could strongly affect the dollar and yields, which could continue to climb on more hawkish expectations.
Looking ahead, today’s initial jobless claims will be closely scrutinised, as they could shed light on the strength of the labour market and influence expectations regarding the path of monetary policy. Elsewhere, the currency could experience some volatility against the euro ahead of today’s ECB rate decision. Additionally, the dollar could also remain exposed to the risk of Japanese intervention in support of the yen, which fell to a 40-year low.
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