Has Janet Yellen marked a turn — albeit, perhaps short-term — for the dollar rally?

Traders infer from the Federal Reserve chairwoman’s comments this week that even as she prepares to raise rates this year her dovish credentials remain intact.

Treasury yields slid from recent highs and the dollar index (DXY) dipped further from an 11-year peak.

DXY constituents are steadier. The euro’s existential angst has dissipated after a Greek reform plan was accepted by creditors.

Even with the imminent arrival of the European Central Bank’s €60bn-a-month asset purchase programme, the common currency looks to have halted its recent slide.

Similarly, the yen seems reluctant to fall again through Y120 per buck unless the Bank of Japan delivers more largesse — possibly in April.

This comes as the “long” dollar trade remains very crowded. Strategas Research calculates net-long positioning is nearly three standard deviations from its 10-year average.

Any trend reversal could thus cause some pain in forex — and be all the sharper for it.

That may be good news for some pockets of the stock market, however.

For example, Hewlett-Packard’s shares got whacked this week after forecasting full-year earnings would be well below analysts’ expectations because of the stronger greenback.

Watch Thursday’s release of US consumer price inflation data. A softer than forecast print may spook the dollar bulls.


Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.