- The divergence of Treasury yields and the dollar - Fed rate
policy--double bind or double blind? - Quantitative easing and
the long term value of the dollar - The 10 year yield returns
from oblivion In a normal world these two charts would be
complementary. As interest rates on the 10-year Treasuries rise
one could reasonably expect the Dollar Index to follow. But ever
since March 18th when the Federal Reserve announced its $300
billion quantitative easing policy, the divergence has been
pronounced.—the higher Treasury rates climb the lower the Dollar
Index sinks. Has the natural order of the currency markets been
upended? Dollar Index 1 Year Chart In normal economic times, the
currency market and the bond market respond to the anticipation
of higher US rates. The price of Treasuries fall, the yield
climbs and the dollar gains. It is the expectation of returning
economic growth and inflation that piques the anticipation for a
new upward rate cycle from the central bank? If this were a
standard recession, wi