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The Dollar Rally Is A Small Jump Before A Long Downfall

By FxPro Financial Services Ltd (Alexander Kuptsikevich)ForexFeb 05, 2021 07:13AM ET
www.investing.com/analysis/the-dollar-rally-is-a-small-jump-before-a-long-downfall-200558807
The Dollar Rally Is A Small Jump Before A Long Downfall
By FxPro Financial Services Ltd (Alexander Kuptsikevich)   |  Feb 05, 2021 07:13AM ET
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The strengthening of the dollar is taking its cue from the optimism around economic recovery, which is reflected by the steepest yield curve we have seen in 5 years.
 
While the Fed is slashing the near-term yields to rock-bottom, Treasury yields with a maturity of more than three years are rising rapidly. In the current situation, this indicates impending higher inflation rates.

The steepest yield curve in 5 years
The steepest yield curve in 5 years

There are two explanations for these forecasts. The first is that the expectation of stronger economic growth would allow the US Federal Reserve to normalise rates in the longer term by winding down its emergency support programs.
 
The second explanation for market dynamics is not so optimistic. The rise at the longer end of the curve is explained by both higher inflation expectations and a perceived increase in government bonds' supply, which is undermining their price. Yields on 30-year Treasuries have risen to 1.92% and are almost back to pre-crisis levels of 2%. 10-year are yielding 1.31% versus 1.56% a year earlier and have come a long way from 0.5% last July.
 
Higher yields are attracting buyers of long-term US government bonds, creating a pull in the dollar. However, it is also worth looking at the situation from a different angle: Higher yields mean lower prices for these bonds. In other words, the balance has already shifted towards sellers.
en-years are yielding 1.31% versus 1.56% a year earlier and have come a long way from 0.5% last July.
en-years are yielding 1.31% versus 1.56% a year earlier and have come a long way from 0.5% last July.

The nature of the stimulus measures and multi-year lows for many commodities last year make the most likely scenario the beginning of a new commodity supercycle, during which the dollar sagged in the 2000s, mid-1930s and early 1960s.

This suggests that the current dollar recovery may be a small jump before a long downfall.

The FxPro Analyst Team

The Dollar Rally Is A Small Jump Before A Long Downfall
 

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The Dollar Rally Is A Small Jump Before A Long Downfall

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Comments (9)
Shaxboz Hamrayov
Shaxboz Hamrayov Feb 07, 2021 2:25PM ET
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is good thanks you
Ahmed Ogidan
Ahmed Ogidan Feb 05, 2021 1:13PM ET
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Finally, something close to the truth.  With the rate of fed money, the dollar index should be below 80
Sol Wein
Sol Wein Feb 05, 2021 12:56PM ET
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Finaly! An artical that makes sense
Eric Moon
Eric Moon Feb 05, 2021 12:42PM ET
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a Spiritual Correction from Almighty God is in the making along with an economic correction.we all must repent our sinful nature to God first if you want to live a prosperous life.revival follows.then prosperity.greed *******
Dark Side of the moon
Dark Side of the moon Feb 05, 2021 12:39PM ET
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the most objective I' ve red these days.
Lonnie Shelton
Lonnie Shelton Feb 05, 2021 12:38PM ET
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agreed. Good article.
Jack Again
Jack Again Feb 05, 2021 12:34PM ET
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This will help PM's and WTI prices to rise.
Ayyub Faraz
Ayyub Faraz Feb 05, 2021 12:34PM ET
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Prics the coins but freelancing work
Phil Kimmel
Phil Kimmel Feb 05, 2021 12:33PM ET
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“A long downfall” is not a very accurate measure. Please be more soecific
Deborah Hill
Deborah Hill Feb 05, 2021 12:33PM ET
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76 on the dollar index. look at previous dollar crash in times like are before us.
Joe Clark
Joe Clark Feb 05, 2021 12:33PM ET
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do your ********research!!!
Jihad El Esta
Jihad El Esta Feb 05, 2021 12:32PM ET
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