MUFG: Elevated Real Yields Support USD, Dampen Asia FX

MUFG analyst Lloyd Chan highlights that US Treasury yields have only eased marginally, keeping the broader interest-rate environment favorable for the US Dollar. Elevated real yields, combined with the persistent 'high-for-longer' narrative for US rates, continue to drive firm demand for the greenback. This backdrop weighs on Asian foreign exchange markets, with the Dollar remaining well-supported against regional currencies.

The outlook suggests that as long as US real yields stay elevated and the Federal Reserve maintains its cautious stance, the Dollar will retain its strength, limiting any significant recovery in Asia FX.