The dollar has bounced from 2-year lows over recent days as it finds a foothold along with inflation-adjusted, or 'real' long-term U.S. yields. The greenback has been pummelled of late as real 10-year Treasury yields sank to unprecedented lows below -1.0%. The assumption is the Fed will keep policy rates and long-yields near zero long into any recovery of activity and inflation to help keep the mountain of new U.S. government debt affordable. That view, as analysts at Morgan Stanley point out, has skewed the entire investment world toward extreme "long duration" positions in bonds, equity sectors like tech and even precious metals such as gold and silver - and has made global markets more sensitive than every to any change in the interest rate outlook from here.
Chart by Ritvik Carvalho and commentary by Mike Dolan.
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