The EUR/USD pair has reached the 1.09 level again. But there’s actually a very strong argument in favor of the dollar right now: US yields. The measure that Ulrich Leuchtmann, Head of Commodities and FX Research at Commerzbank, prefers to look at here is real 5yr x 5yr Treasury yields.
The USD advantage has increased
What does it mean that the real 5yearsx5years of the euro zone is zero? It means that, from today’s perspective, capital cannot be invested profitably in the period from 2028 to 2032. Instead, even without credit risk, it can be invested in the US with a return of 1.5% per year. This makes the Dollar more attractive than the Euro. Because Dollars are needed to make these investments more attractive.
This discrepancy has existed since 2014 and has long been discounted in EUR/USD exchange rates. But it has expanded in recent days. The dollar advantage has increased. And that is why the EUR/USD is no longer trading above 1.12 but around 1.09.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
