Dollar Surges as Oil Prices Rise and Trade Tensions Escalate
The US dollar rose on Friday as Treasury yields increased due to inflation fears sparked by rising oil prices and renewed trade tensions. The dollar strengthened against the yen, reaching a 40-year high, while sterling and the euro fell. Oil prices surged above $100 per barrel after Yemen's Houthis attacked two Saudi oil tankers in the Red Sea, extending the Middle East conflict to a second major shipping chokepoint.
US President Donald Trump threatened 'major military punishment' for Iran and its Houthi allies. The Trump administration also announced new tariffs of 10% and 12.5% on goods from 60 trading partners over allegations of lax enforcement of forced labor bans, adding to inflationary pressures.
Vishnu Varathan, head of macro strategy for Asia-Pacific at Mizuho, noted that the world is facing a 'double whammy' of tariffs and oil price shocks. He also predicted that 30-year yields may hit 6% and the 10-year yield could reach 5%.