Recently, with the rise in U.S. Treasury bond yields and investors seeking safe-haven assets, the U.S. dollar is approaching a new high for 2024. According to Bloomberg, the Bloomberg Dollar Spot Index is almost touching its high from last November, and technical indicators show that the dollar's strength still has room to rise. The premium for hedging the appreciation of the U.S. dollar against a basket of currencies over the next three months has climbed to its highest level in over a year. Rodrigo Catril, a strategist at the National Australia Bank (NAB), said that the recent safe-haven appeal of the U.S. dollar could become a catalyst for an upward breakthrough. Although the political uncertainty in France has been temporarily eased, the market often adopts a "shoot first, ask questions later" approach. Therefore, the political situation in France will continue to support the U.S. dollar in the coming weeks. The leader of France's left-wing party called for unity at the first campaign rally, and European Central Bank officials believe that the turmoil that swept the French market last week is not a cause for panic. These measures have somewhat calmed investors' nerves. However, many people remain highly vigilant to any shifts in sentiment, which could reignite the pursuit of the U.S. dollar. Over the past four weeks, the U.S. dollar has been strengthening, with high U.S. interest rates and recent political turmoil enhancing the appeal of the U.S. dollar.The US dollar has broken through its medium-term weekly downtrend, which is also a bullish signal for investors. However, if data continues to show that the world's largest economy, the United States, is cooling down, it may increase the risk of the Federal Reserve cutting interest rates earlier than the market expects.
On Tuesday, during the Asian trading session, the US dollar stabilized, showing strength against all G10 currencies except the Swiss franc and the Swedish krona this month. Traders will also closely monitor the upcoming US elections, which could inject new uncertainties into the market.
JPMorgan strategist Marko Kolanovic wrote in a report: "The US dollar is currently outperforming US Treasury yields, so if market volatility decreases, the US dollar may weaken in the short term. However, the upcoming US elections will ultimately limit the dollar's weakness."
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