Dollar Dips as U.S. Treasury Pick Calms Bond Markets

The dollar softened as Scott Bessent's selection for U.S. Treasury secretary reassured bond markets, lowering yields and trimming the dollar's rate advantage. Markets anticipate diverging rate policies between the ECB and Fed, while Bessent favors a strong dollar, rendering any currency pullback potentially short-lived.

The dollar has seen a slight decrease in its recent rise following the appointment of Scott Bessent as U.S. Treasury secretary. His fiscal conservatism calmed bond markets, leading to a dip in yields, which affected the dollar's rate advantage. Bessent, however, supports a strong dollar, questioning the persistence of this weakening.

The dollar's recent surge marked just the third time in 21st century history that it rose for eight consecutive weeks. Despite this, many technical indicators suggest the currency is overbought, sparking expectations of consolidation. The dollar index fell by 0.5% to 106.950, retreating from its peak, while other currencies like the euro and yen made gains.

In global markets, Eurozone surveys indicate manufacturing weaknesses, contrasting with stronger performances in the U.S., widening rate differentials benefiting the dollar. The European Central Bank may adopt more aggressive easing, whereas expectations for Federal Reserve rate cuts have diminished. Cryptocurrencies, including Bitcoin, are seeing changes in anticipation of regulatory shifts under the Trump administration.

(With inputs from agencies.)