FXStreet reports that the USD has begun the new year on a slightly better footing. This comes as US yields have ground higher. Economists at TD Securities expects the backup in yields to continue as the composition temporarily shifts to real rates in the short-term.

“We see signs that suggest some tactical relief for a badly bruised greenback while remaining medium-term USD bears. Indeed, we think currency markets are at a crossroads, revealing some kinks of the reflationary theme that has fueled aggressive USD shorts. The impact could leave USD bears wrongfooted on a 2-3% move higher.”

“One key ingredient to upend the USD weaker move would be a seismic shift in the real yield backdrop such that it regained international supremacy. Until then, the sustainability of a USD up move is questionable and likely to be viewed as a countertrend or corrective move, rather than the beginning of a bullish USD outlook.”