As global bond markets experienced a broad selloff, the U.S. dollar extended its rally for a fifth consecutive day. Concurrently, oil prices climbed amid growing market skepticism over a swift normalization of energy supplies from the Middle East. The Bloomberg Dollar Spot Index recorded its largest weekly gain since March 6.
The Bloomberg Dollar Spot Index rose 0.4% on Friday, bringing its weekly advance to over 1.2%.
Brent crude oil surged as much as 3.8%, approaching $110 per barrel, before paring some of its gains.
According to CFTC data, speculative foreign exchange traders reduced their net long positions on the dollar to $5.0 billion for the week ending May 12, down from $7.6 billion the prior week.
The yield on the 2-year U.S. Treasury note rose 6 basis points to 4.077%, its highest level in over a year. The 10-year yield jumped more than 10 basis points on Friday.
All G-10 currencies declined against the dollar on Friday. The Japanese yen saw the smallest drop, while the New Zealand and Australian dollars were among the biggest decliners.
The USD/JPY pair advanced for a fifth straight day, marking its longest winning streak in over three months. The pair reached a high of 158.79, setting a new peak for the month.
Strategists at Societe Generale advised exiting Japanese interest rate carry trades, citing expectations for a Bank of Japan rate hike in June and rising "fiscal and monetary risks" in the lead-up.
GBP/USD fell as much as 0.7% to 1.3315, its lowest level since April 8. The pound recorded a weekly loss of 2.3%, its largest weekly decline since November 2024.
U.K. government bonds sold off sharply after Manchester Mayor Andy Burnham secured a potential path to challenge Prime Minister Keir Starmer's leadership, raising investor concerns about renewed political instability and the possibility of more expansionary fiscal policy.
EUR/USD dropped as much as 0.45% to 1.1617, its weakest level since April 8. RBC Capital Markets stated that foreign demand for U.S. assets and the dollar's role as a safe-haven currency make it an attractive buy in the near term. The firm recommended going long the dollar against the euro and the Swiss franc.
Some information was provided by foreign exchange traders familiar with the transactions who requested anonymity as they were not authorized to speak publicly.
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