Oil Price Surge Lifts Bond Yields, Subdues Currency Markets
Currency markets were subdued on Thursday as investors weighed the impact of a fresh surge in oil prices and global bond yields. The Brent crude futures price remained above $100 per barrel, with Iran and the US engaging in a wave of attacks on shipping since the start of the war, threatening to worsen energy supply disruptions from the Middle East.
The resulting inflation pressure sent global bond yields higher, with benchmark 10-year Treasury yields reaching their highest levels since 2023. However, the dollar found only marginal relief and eased against major peers after an earlier move higher, with the euro and sterling both edging up.
The Bank of Japan is expected to hike interest rates next week, while the European Central Bank looks set to raise its key rate on Thursday for the second time this year. The US inflation readings, including producer prices on Thursday and CPI on Friday, will be closely watched ahead of the Federal Reserve's policy meeting.
The greenback index eased to 98.73 after earlier gains, while the yen stood tall near a seven-month high. Markets are becoming less responsive to oil shocks as the war drags on, with debasement trades and global central bank tightening also weighing on the dollar.