Standard Chartered: U.S. Stocks and Treasury Yields Rising Together Is Bullish for Risk-Sensitive Currencies

Odaily reports: Strategists at Standard Chartered Bank said in a report that over the past 30 years, the most favorable market environment for risk-sensitive currencies has been the simultaneous occurrence of rising U.S. stock prices and rising U.S. Treasury yields.

The strategists noted that in the early stages of an economic recovery, yields tend to be low, reflecting accommodative monetary policy and insufficient credit demand. As market optimism about the economic growth outlook heats up, this shift is typically also reflected in stock markets, bond yields, and currencies positively correlated with risk sentiment, including the Canadian dollar, Australian dollar, Norwegian krone, Mexican peso, and New Zealand dollar. The strategists said: "If rising yields reflect an increase in risk premiums or heightened inflation risks, then this correlation may no longer be as reliable."