US dollar declines for second day ahead of labor market data

Yields on US Treasury bonds decreased for the second consecutive day.

Prior to the release of Friday's labor market data, the US dollar is declining.

The Bank of Japan is expected to intervene on Tuesday, which will likely cause a decrease in the value of the US Dollar.

There is no indication that the dollar's positive trajectory has come to an end.

For the second day in a row, the dollar index has been decreasing due to a correction in US government bond yields. On Wednesday, 10-year yields rose to their highest level since 2007, surpassing 4.88%, before beginning to drop, bringing a sense of relief to all other assets that had been negatively impacted by the recent strength of the US dollar.

On Tuesday, USD/JPY dropped significantly to 147.30 after a short period of surpassing 150. Japan has not yet declared any intervention, and neither the finance minister nor the head of foreign exchange diplomacy has made any direct remarks.

In September and October of last year, Tokyo intervened to purchase the yen when it dropped to its lowest rate in 32 years, 151.94 per dollar.

National Australia Bank stated that the market had a pause before the US employment data is released tomorrow. If the data is better than expected, they would not be shocked if the dollar and 10-year Treasuries reach their recent peaks.

In September, the US saw an increase of 170,000 new jobs, compared to the 187,000 from the month before, as estimated by economists surveyed by Bloomberg. However, with signs of a slowing economy in the US, Treasury yields may be affected and the dollar may not experience further growth.

Macquarie Group expects that the dollar will remain strong for a few more months, due to the US economy outperforming other countries and investors seeking safe investments. However, they anticipate that the dollar will experience a significant drop in 2024 when central banks, with the Federal Reserve in the lead, start to reduce interest rates.