Dollar backs off five-week high as US treasury yields drop

The dollar fell in European trade on Tuesday against a basket of major rivals, extending losses for the second day away from five-week highs on profit-taking while US treasury yields declined as well.

The losses came after bearish remarks by Fed officials this week, which bolstered the case for a June interest rate cut.

The Index 

The dollar index fell 0.2% today to 104.01, with a session-high at 104.24, after closing down 0.2% on Monday, the first loss in three days on profit-taking off five-week highs at 104.50. 

US Treasury Yields

US 10-year treasury yields fell 0.6% on Tuesday, almost touching a two-week trough and pressuring the greenback.

The developments came after a batch of bearish data from several Fed officials, which were interpreted as in favor of an early US rate cut in June. 

Fed Remarks 

Fed Chicago President Austan Goolsbey said on Monday that at the Fed’s policy meeting last week, there were suggestions for three interest rate cuts this year.

However, the Fed will be cautious and will wait for more data before cutting rates.

US Rate Prospects 

The odds of a 0.25% Fed interest rate cut in May stood at 8%, while the odds of such a cut in June stood at 70%. 

Traders overall expect 75 basis points of interest rate cuts in 2024. 

Now investors await important US personal spending data to get a better view of inflation and the likely path ahead for policies.