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Falling yields finally hit the dollar

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Dollar hits session lows

The rates market was the tell (as usual).

The US dollar is under increasing selling pressure as the market buys into the Fed’s view that inflation will be temporary. US 10-year yields are set for the lowest close since early March.

The signal is lower US rates for longer and that’s weighing on the dollar right across the board today. I do wonder if pension fund flows into bonds may be skewing yields lower but for now the price is the message.

I think the real opportunity now is in emerging markets, particularly commodity exporters. Lower US rates are great news for them and risk assets in general, plus they’re slowly catching up on vaccines. Many are still depressed.

Here’s USD/MXN, which could soon break out lower:

Dollar hits session lows

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