Thomas David731_ Walker

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What is the relationship between bond yields and forex markets?

Bond yields directly affect currencies through interest rate differentials. Higher yields attract capital inflows, strengthening the currency. Example: when U.S. Treasury yields rise, USD often strengthens as global investors chase returns. Institutions model currency fair value using yield spreads—like 10-year U.S.-German bund spreads to gauge EUR/USD direction. Retail traders can track yields via economic calendars and bond market data. Benefits: yields anchor medium-term forex trends. Risks: sometimes yields and currencies decouple due to risk sentiment shifts. Still, yield analysis remains one of the most reliable macro tools. For traders, ignoring bonds means missing one of the strongest drivers of forex.