Dollar Falls on Lower T-Note Yields


Rich Asplund, Barchart

Aug 1, 2022


The dollar index (DXY00) on Monday fell by -0.45 (-0.43%) and posted a new 1-month low.


The dollar was undercut mainly by a -6 bp drop in the 10-year T-note yield to 2.58%.  The 10-year T-note yield fell due to a -5 bp drop in the 10-year inflation expectations rate to 2.51%, sparked in part by a -4.8% sell-off in crude oil prices.


The dollar Monday also continued to suffer from ideas that last week’s news of a technical U.S. recession (i.e., the back-to-back quarterly GDP declines in the first half of 2022) will force the Fed to curb its rate-hike ambitions.


The dollar Monday saw underlying support after the U.S. ISM manufacturing report showed some resiliency for the U.S. manufacturing sector.  Monday’s July U.S. ISM manufacturing index fell by -0.2 points to a 2-year low of 52.8, which was stronger than expectations of a -1.0 point decline to 52.0.  The July prices-paid sub-index fell sharply by -18.5 points to 60.0, much weaker than expectations of a decline to 74.3.  The July new orders sub-index fell by -1.2 points to 48.0, but the July ISM employment sub-index rose by +2.6 points to 49.9.


In a supportive factor for the dollar, Minneapolis Fed President Kashkari’s (non-FOMC voter) on Sunday said that the Fed is committed to doing what is necessary to slow inflation to its 2% target...


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