Rate Volatility, EU Bond Stress Spilling Over Into FX
Rising U.S. rate volatility and European bond-market stress are impacting the FX market more significantly than the greenback's advance, according to OCBC strategists. This trend is weakening the euro and creating headwinds for emerging market carry trades and risk-sensitive currencies like the Australian dollar.
S. rate volatility and stress in European bond markets are becoming a bigger FX story than the dollar’s advance. They said the move is weighing on the euro and creating a headwind for EM carry trades and risk-sensitive currencies such as the Australian dollar, leaving investors less willing to hold risk exposure.