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Dollar sentiment faces event-driven risks tied to US yield outlook
MUFG warns that if there is no credible fiscal consolidation by Warsh, pressure could build on the long end of the bond market, potentially pushing the 30-year yield above last week’s 5.3% high.
MUFG strategist Derek Halpenny said the US dollar is broadly stable as investors focus on US Treasury actions aimed at containing the rise in long-term yields, alongside renewed discussion of a potential “debasement” trade.
Halpenny pointed to near-term event drivers for dollar sentiment, including Scott Bessent’s Economic D-Day plan on Iran and Fed Chair Warsh’s Jackson Hole remarks, with risks skewed toward further downside for the dollar.
He noted that after a US Treasury bond buyback announcement, investors are looking for additional information on fiscal consolidation plans, but MUFG is skeptical that much new detail will emerge.
Halpenny added that Warsh-related developments could hurt the bond market’s long end if credible fiscal measures are not presented, and he flagged a scenario where crude oil rises could coincide with the 30-year yield breaking above the prior 5.3% high set last week.
Latest closeWTI crude $82.40 ▲1.4%