US Dollar slides on JGB volatility spillover – ING

💡 DMK Insight

The dollar’s recent sell-off highlights the interconnectedness of global markets, especially with Japanese bond volatility at play. Traders should note that the rebound in long-dated Japanese Government Bonds (JGBs) has provided some relief, but the underlying fiscal risks remain a concern. Trump’s willingness to compromise with EU leaders in Davos could signal a shift in geopolitical tensions, which might stabilize the dollar in the short term. However, this could also lead to increased volatility as traders react to any unexpected developments. Keep an eye on the dollar index and JGB yields; a sustained rebound in JGBs could further support the dollar, while any negative news from the Davos meetings could trigger renewed selling pressure. The flip side is that if fiscal risks escalate again, we could see a sharp reversal. Watch for key levels in the dollar index around recent lows to gauge sentiment, and monitor JGB yields closely for signs of renewed volatility.