The biggest theme in the FX market right now is the weakness in the dollar. It is defying better than expected US economic data (the upside payrolls surprise last Friday) as well as the Fed’s tapering programme. So what is driving this weakness and can it last? 1, The yield effect The 10-year Treasury yield has been trading in a range between 2.6 % and 2.8% since the end of January and currently it is testing the air below the bottom of the range around 2.59%. The Treasury yield has an indirect effect on dollar weakness, when yields are muted it reduces the cost of borrowing dollars, which can weigh on the value of ... (full story)