US Dollar May Rise On Haven Demand As Market Sentiment Sours


USD Price Chart


  • US Dollar sees yield- and haven-based support in January jobs data
  • Markets tellingly cheer dovish Fed, despair signs of strong economy
  • Incoming risk aversion may offer US Dollar upside follow-through

A soggy US Dollar response to January’s unexpectedly strong employment data speaks volumes about the underlying drivers of the currency’s performance. Payrolls grew at the fastest pace in 11 months while an uptick in the jobless rate looks to have occurred for all the right reasons considering a parallel rise in labor-force participation. Wage inflation moderated but held relatively strong at 3.2 percent on-year.

Treasury bond yields rallied as the impressive data set nudged up the priced-in 2019 monetary policy outlook implied in Fed Funds futures. Risk appetite firmed as well at first, but the bellwether S&P 500 quickly lost momentum and turned downward. The Greenback initially rose with yields, pulled back as stocks hit an intraday high, then rallied back to recover lost ground as sentiment soured.


This seesaw price action speaks to the benchmark currency’s conflicting roles as a yield-seeking and haven asset. On one hand, it continues to command the highest baseline rate of return in the G10 FX space, which ought to align it with pro-risk assets. On the other, its unrivaled liquidity makes it a sought-after commodity when capital pours out of other corners of the market amid broad-based liquidation.

It is likewise telling that investors’ mood soured not only despite evidence of a stronger US economy than had been expected, but arguably because of it. Traders cheered last week’s dovish turn in Fed rhetoric despite its origins in policymakers’ deepening concerns about the global economic outlook. Data flow carrying potential to revive a more hawkish disposition turned this dynamic on its head.

1 2
View single page >> |

Disclosure:Looking for a technical perspective on the US Dollar? Check out the 


How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.