Standard Chartered: Rising US Stocks and Bond Yields Favor Risk-Sensitive Currencies

Standard Chartered's strategists noted in a report that over the past 30 years, the simultaneous rise of the US stock market and US bond yields has been most beneficial for risk-sensitive currencies. In the early stages of economic recovery, yields are typically low, reflecting loose monetary policy and insufficient credit demand. As market optimism about economic growth prospects increases, changes are usually observed in the stock market, bond yields, and currencies positively correlated with risk sentiment, such as the Canadian dollar, Australian dollar, Norwegian krone, Mexican peso, and New Zealand dollar. The strategists emphasized that if rising yields reflect an increase in risk premiums or heightened inflation risks, this correlation may no longer be reliable.

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