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Concerns Over Emerging Market Debt Levels Flip U.S. Treasury Yields Lower


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The U.S. Dollar weakened against several major currencies on Thursday, driving it down against a basket of currencies heavily weighted by the Euro. While the Euro provided selling pressure early in the session, an even steeper break occurred after U.S. Treasury yields fell sharply late in the session.

June U.S. Dollar Index futures settled at 93.376, down 0.258 or -0.28%.

The EUR/USD was supported amid expectations that the European Central Bank would begin unwinding its stimulus program. The announcement of its plans is expected at next week's ECB meeting. The greenback was dragged further down as U.S. Treasury yields fell sharply on Thursday on the back of receding risk appetite in the broader markets.

The GBP/USD traded nearly flat on worries about Brexit negotiations before pulling back on the dollar's broader weakness.

The AUD/USD was also lower for a second session as investors took profits after this week's rise. The catalyst behind the selling pressure was fueled by a drop in the Australian trade surplus.

U.S. Economic Reports

U.S. Weekly Unemployment Claims came in better-than-expected at 222K. Traders were looking for 223K. The IBD/TIPP Economic Optimism report came in at 53.9, lower than the 54.2 estimate but higher than the previous read. Consumer Credit fell to 9.3B, lower than the 13.9B forecast. The previous month was revised higher to 12.3B.

The reports had little effect on the markets with most traders focused on trade issues heading into this weekend's G-7 meeting. Traders are also waiting for the widely anticipated meeting between President Trump and North Korea President Kim Jong-un.

U.S. Treasury Markets

U.S. Treasury yields plunged on Thursday as investors moved funds into safe-haven assets amid growing concerns over emerging market risk. Traders were also taking protection ahead of this weekend's G-7 meeting, and next week's key monetary policy meetings.

The yield on the benchmark 10-year Treasury note fell to 2.939 percent, while the yield on the 30-year Treasury bond dropped to 3.089.

Global investors are watching debt levels in emerging markets like Brazil. There is some talk that banks are concerned about overexposure to Brazil, leading some speculative hedge funds to short the dollar in an effort to trim exposure in the country's volatile currency.

U.S. Stock Markets

The major U.S. equity indexes posted mixed results on Thursday with the Dow rising over 100 points, the S&P 500 Index trading nearly flat after giving up earlier gains and turning lower at one point. The NASDAQ Composite broke a four-day winning streak as declines in Facebook encouraged investors to book profits in other tech stocks.

This article was originally posted on FX Empire

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This article appears in: Investing , Bonds , Currencies , US Markets
Referenced Symbols: SPX



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