Dollar Slumps Amid Global Tensions
The US Dollar (USD) has been trading mostly lower this week, testing six-week lows despite risk aversion driven by geopolitical tensions in the Middle East. The US Dollar Index (DXY) dipped to 99.90 for the first time since mid-June, only to recover some ground at the end of the North American session.
The price action reflects renewed tensions between the US and Iran, as well as the Japanese Ministry of Finance's intervention in the FX markets to support the Yen. This move makes sense given the Federal Reserve's hawkish message from its event on Wednesday.
US Treasury yields bounced sharply on Friday, with the 30-year yield hitting tops not seen since June 2007 and the 10-year tenor advancing to 18-month peaks. The Fed held interest rates at 3.50-3.75%, but the decision carried a hawkish tone as three officials voted for an immediate 25-basis-point increase.
Speculative positioning on the US Dollar gathered further strength in the week, with data from the Commodity Futures Trading Commission showing net long positions rising to 15.6K contracts from 13.2K in the prior week. The weekly rise of 2.4K contracts was a stark reversal of the largely unchanged positioning seen in the previous week.