With the US dollar resurgent on the back of the rising tide in the US 10-year bond yield – which recently surpassed 3% for the first time in four years – other currencies, including the Australian dollar, are sliding in its wake.
After a 15-month fall, during which it surrendered 14%, the US dollar index, which measures the greenback against a basket of other currencies, has added 4.4% since the start of February. In “our” cross – the A$/US$ rate – the Aussie has dropped more than six “big figures” (or US cents), from 81.06 US cents, to the current quote of 75 US cents.
And with the US economy well and truly in “goldilocks” territory – not too hot, not too cold – and US yields heading higher, with further official interest rate rises almost certainly coming from the Federal Reserve this year, the greenback looks to be only getting started. This kind of rally can become self-fuelling, as big speculative “short” positions on the US dollar are unwound.