Standard Chartered: US Stocks and US Treasury Yields Rising Together Benefit Risk-Sensitive Currencies

Odaily News: Strategists at Standard Chartered Bank stated 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 US stock prices and rising US Treasury yields.

The strategists pointed out that in the early stages of economic recovery, yields tend to be low, reflecting loose monetary policy and insufficient credit demand. As market optimism about the economic growth outlook heats up, this change 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 stated: "If the rise in yields reflects an increase in risk premiums or heightened inflation risks, then this correlation may no longer be as reliable."