How Bond Price affect currency?steemCreated with Sketch.

in forex •  7 years ago 

During uncertainty (risk off), demand for bonds usually increase when investors are concerned about the safety of their investments. Money starts to flow into the bond market. This flight to safety drives bond prices higher and, by their inverse relationship, pushes bond yields down --> Interest rate down, currency down.

As more and more investors move away from stocks and other high risk instruments, increasing demand for less risky instruments such as U.S. bonds and the safe heaven assets such such GOLD, JPY ...

Government bond yields also act as an indicator of the overall direction of the country's interest rates and expectations.

For example, in the U.S., you would focus on the 10 year bond yield.
https://www.investing.com/rates-bonds/u.s.-10-year-bond-yield

A rising yield is dollar bullish.
A falling yield is dollar bearish.

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