Dollar Stabilizes Amid Treasury Yield Recovery, 'Debasement Trade' Reignites
The US dollar has been stabilizing near three-month lows due to a rapid recovery in Treasury bond yields. Yields on 30-year bonds have returned to levels seen after the Treasury announced it was increasing the minimum purchase volume to $4 billion.
Falling stock indices, a rally in Brent crude prices, and positive signals from the US economy have also provided support for the greenback.
Recent data indicates that the strength of the US economy may be underpinning inflation. The S&P Global's Purchasing Managers' Index (PMI) jumped to 56 in August, its highest level since April 2022, and Bloomberg analysts have raised their forecast for US GDP in the third quarter from 2% to 2.5%.
The revival of the 'debasement trade', where investors are eroding confidence in bonds and currencies driven by their issuing authorities' policies, has led to capital flight from debt and currency markets to other markets.