U.S. Yields Are Quietly Holding the Dollar Up

The U.S. dollar softened slightly at the start of the week, but the move feels more like hesitation than a real breakdown. One reason sits in the bond market. U.S. Treasury yields are still holding firm, and the 10-year yield near 4.16% continues to provide underlying support for the dollar.

What’s really shifting right now isn’t direction — it’s liquidity. As the year draws to a close, trading volumes across FX and bond markets are thinning out. That makes price action more fragile. Even small position changes can lead to outsized moves when liquidity dries up.

Against this backdrop, traders are turning their attention to the next set of U.S. data, particularly GDP and durable goods orders. These releases could help clarify whether the economy is slowing meaningfully or simply losing momentum at the margins.

For now, steady yields are keeping the dollar from sliding further. But in a low-liquidity environment, calm can turn into volatility quickly, even without a major headline driving it.