The greenback firmed across the board, rising 0.8% against the yen to 147.40 and nudging 0.1% higher against the euro to $1.1691. The Canadian dollar slipped 0.1% to C$1.3668 after an initial knee-jerk drop of over 0.5% on the tariff news. While broader dollar sentiment remains bearish for the year, safe-haven buying and short-covering triggered a bounce.
Supporting the move were strong U.S. labor data and FOMC minutes that dialed back expectations for imminent rate cuts. Still, investors remain wary of lasting dollar strength due to the Fed’s cautious stance and long-term policy risk.
How Do Treasury Yields Reflect Shifting Risk Sentiment?
Bond yields moved higher across the curve. The 10-year yield jumped 7 basis points to 4.417%, and the 30-year rose 9 basis points to 4.954%. The short-end also ticked up, with the 2-year at 3.893%. These yield moves point to increased inflation expectations as Trump’s tariffs threaten to drive input costs higher and complicate monetary policy timing.
The stronger-than-expected labor data further supported the bond sell-off, as the Fed now faces a tougher environment to justify near-term rate cuts. With rate hike odds off the table, pricing is shifting to reflect prolonged holding.