US dollar index steady as bond yields surge

The US dollar index (DXY) lifted in the overnight session as the US government bond sell-off intensified. The index rose to $96.25, which was about 0.70% above the lowest level in December.

US bond sell-off

The DXY index rose sharply on the first training day of the year as investors paid a close attention to the bond market. US bonds sold off as the number of Covid-19 cases rose. The yield of the 10-year government bonds rose to 1.63% while the 30-year rose to 2.0%. Bond yields are usually inverse to the prices.

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The US dollar index rose even after the relatively weak US manufacturing PMI numbers. Data published by Markit showed that the manufacturing PMI declined slightly to 57.8 in December. That was slightly lower than the estimate published two weeks ago.

Still, the PMI remained above 50.0, signaling that the manufacturing sector is doing relatively well. The biggest challenge is the Omicron variant. While the variant is a bit milder than Delta, more infected people are calling in sick. 

US dollar index analysis

The next few days will be important for the US dollar. On Tuesday, the Institute of Supply Management (ISM) will publish the latest manufacturing PMI data. Like the one from Markit, analysts expect the data to show that the manufacturing sector did modestly well in December.

On Wednesday, ADP will publish the latest private payrolls data. While the Omicron and Delta variants spread in December, analysts expect that the private sector added more than 400k jobs in December last year.

On Thursday, the US will release the latest initial jobless claims numbers. The data is expected to show that the number of people filing for claims jumped remained stable last week.

The most important figure for the dollar index will be the latest non-farm payrolls (NFP) that are set to be published on Friday. The numbers are expected to show that the economy added more than 400k jobs while the unemployment rate declined to 4.1%.