Dollar Weakness Continues Amid Rising Yields and Energy Price Surge

The US dollar is struggling despite higher US yields due to rising energy prices driven by the ongoing standoff between the US and Iran. This has led to a rally in oil- and gas-linked currencies such as the Norwegian krone, while the Canadian dollar is being held back by concerns over tariffs.

US-Japan yen intervention is still affecting markets, mainly through the US Treasury market rather than the yen itself. Higher US yields have risen partly because investors are demanding a higher term premium due to uncertainty about inflation, interest rates, and policy direction under Kevin Warsh.

The dollar has not benefited from these developments as it usually would when yields reflect strong growth. Instead, higher yields reflect a higher risk premium rather than stronger US economic prospects. As a result, the EUR/USD exchange rate has moved above 1.16, with further dollar weakness expected.