A new theme from the whiplash that skyrocketed tariffs on Wall Street this week is whether they will diminish their role as a volatility in US Treasury and their desire for US assets and their role as a safe asset.
The US Dollar Index (DX-Y.NYB), an important measure of the dollar’s strength against a basket of major currencies, has fallen below the 100 level since April 2022 to its weakest point.
Meanwhile, the 10-year yield (^TNX) has surged to the highest level since February, trading at around 4.53%. When bond demand is low, yields rise.
This week’s move was triggered by widening trade tensions between Washington and Beijing. The US has raised tariffs on Chinese goods, and China has increased collection of US imports.
“Beyond trade frictions, there is a worrying trend. The decline in the appeal of dollars and US Treasury bonds is bonds as safe inventory assets,” writes Quasar Elizundia, research strategist at Pepperstone.
“Historically, in a time of global uncertainty, these devices have attracted capital for safety. However, current dynamics suggest a disconnect. Even amidst the global turmoil, feelings towards the dollar and the Treasury could be shifting fundamentally as safe shelters are becoming negative.”
Perhaps the sentiment is an increase in gold (GC = F), a fresh record above $3,200 on Friday.
