The US dollar continues to gather strength. Economists at MUFG Bank expect the greenback to march forward in the coming months. 

UST bond volatility picking up helping lift USD

“The near-term outlook for the USD remains positive and the sharp moves higher in UST bond yields on higher inflation looks likely to remain in place for now. The 10-year UST-Bund yield spread is testing the 180-level again and seems more likely to break higher this time – the first time that would have happened since early March. Higher UST bond volatility has tended to lift the USD this year.”

“The 2-year UST bond yield is now trading at a post-pandemic cyclical high of 0.53% and we are now beginning to see the relative rates adjustment in favour of the US that we expected.”

“Stronger jobs growth and continued elevated inflation over the coming months will likely lead to speculation of a potentially faster pace of QE tapering that prompts higher rate expectations – a scenario that would continue to help strengthen the dollar over the coming months.”