The dollar is headed for its worst week in three months as markets doubt the Fed
can act forcefully enough to rein in inflation. The dollar index is on track to
decline about 1.2% this week; it rebounded on Friday but remains near a
one-month low. The currency has weakened despite a rise in US Treasury yields —
normally dollar-supportive — reflecting concerns about Fed credibility after
remarks from Fed chair KEVIN WARSH that raised fears the central bank may delay
rate hikes and tolerate inflation running above target. Long-term US Treasury
yields are at their highest since 2007. Gavekal Wealth managing director Randhir
Prakash said the simultaneous sell-off in Treasuries and the dollar 'feels very
emerging-market-like', with investors expressing dissatisfaction with the US
policy path — a headwind for Treasuries and the dollar. Suspected Japanese
intervention to support the yen has added further pressure on the dollar.
