Dollar Index, Yields, Treasuries and FX: How Do They All Correlate?

Helious Desk · 8 August 2026 · 7 min read

They look like four separate markets because they sit on four separate screens. They are four views of the same thing, which is what it costs to hold dollars. Once you see that, most of the days that looked contradictory stop being contradictory.

1. What are these four things?

Treasuries are US government bonds. Their yield is the return you earn holding them, and it is the number everything else is priced against. You can watch them on the rates page. The dollar index, usually written DXY, is the dollar measured against a basket of other major currencies. FX is the wider currency market where those exchange rates get set.

None of the four moves on its own. Push one and the rest move almost at once, because all four describe the same thing from a different angle.

2. Why do bond prices and yields move opposite?

More people get stuck here than anywhere else on this page. It is not a correlation. It is arithmetic.

A bond pays a fixed amount. The price is what you pay to receive it. Buy a bond paying $100 a year for $2,000 and your yield is 5%. If the price falls to $1,000, that same $100 a year is now a 10% yield.

Nothing about the bond changed, only what you paid for it. So "Treasuries rallied" and "yields fell" are two ways of describing one event, rather than two things that happened to line up.

3. How do yields and the dollar usually relate?

Usually they move together. Higher US yields tend to mean a stronger dollar.

Money goes where the return is better. If US government debt pays more, buyers abroad need dollars to buy it, and that demand lifts the currency.

The word usually is carrying a lot in that sentence. It is a tendency and not a law, it holds up better over weeks than over minutes, and there is one condition that flips it outright. That is what question seven is about.

4. Why does the differential matter more than the US yield?

Because an exchange rate compares two countries. What matters is the gap between their yields, not either level on its own.

Say US yields rise 10 basis points and German yields rise 20. US yields went up, but euros just became relatively more attractive, so the euro can strengthen against the dollar on a day when US yields rose.

That is why traders who watch only the US 10 year end up confused by FX. Every pair has two sides and both of them are moving. It also means other central banks matter as much as the Fed for currency, because they move the other half of the differential. Quoted in basis points, that gap is the thing you are trading.

5. What is the dollar index actually made of?

Less than most people assume, which matters if you are using it as a stand-in for the dollar. The euro is roughly 58% of the basket. The Japanese yen is around 14% and sterling around 12%, and the Canadian dollar, Swedish krona and Swiss franc split what is left.

So DXY is mostly a euro trade in reverse. There is no Chinese yuan in it and no Mexican peso, and nothing from emerging markets at all. It can sit flat all day while the dollar moves hard against the currency your position cares about. It is a broad gauge of the dollar against Europe and Japan, which is not the same as "the dollar".

6. Why does USDJPY track the US 10 year so closely?

Because it is the cleanest rate differential in the majors.

Japan has run far lower interest rates than the United States for a long time, so the gap is wide and it stays wide. That makes the yen the classic funding currency: borrow where money is cheap, invest where it pays more.

The trade lives on the spread between US and Japanese yields. When the US 10 year moves, the reason to hold the position changes on the spot. So USDJPY reacts to US yields more mechanically than most pairs. It also unwinds fast when the gap narrows, which is why yen strength tends to arrive all at once instead of slowly.

7. When does the rule break?

In risk off conditions. This is the exception that matters most, because it turns up on the days when everything else is going wrong.

When markets are frightened, investors buy US Treasuries for safety, pushing yields down. They also buy dollars for safety, pushing the currency up. Yields fall and the dollar rises together, which is the opposite of the normal relationship.

The dollar does two jobs at once. It is a carry currency, rewarded when US rates are high, and it is the world's reserve and safe haven currency, bought in a crisis whatever the yield.

Which job wins depends on the regime. The switching is not a fault in the relationship. It is the relationship. Treat "higher yields, stronger dollar" as a law and you will be badly wrong on the days that count.

8. How does this connect back to stocks?

Through the same discount rate that drives everything else, plus one extra route.

Rising yields compress equity valuations, which we covered in why the Treasury curve matters for stocks and futures. They also tend to lift the dollar, and a stronger dollar does its own damage to the reported earnings of large exporters, because overseas revenue converts back into fewer dollars. A sharp move higher in yields can hit equities twice.

Any one of those markets on its own tells you very little. Read the combination instead. Yields up, dollar up and stocks down is a coherent tightening story. Yields down, dollar up and stocks down is a fear story. Same move in stocks, different cause, and the two call for different responses.

9. Which releases move all four at once?

The ones that change the expected path of interest rates.

CPI is the biggest, because inflation feeds straight into rate expectations and from there into yields, the dollar and every pair priced against it. Nonfarm payrolls is close behind. The Fed decision and the press conference after it are their own category. Other central bank meetings matter just as much for the currency side, because they move the other half of the differential.

On those days the four markets stop looking like separate screens and move as one. Whether a print was a real shock or just a loud headline is a different question, and a surprise z-score answers it. The calendar tells you when to expect them.

10. How do I watch these correlations?

Start by accepting that correlations are unstable. They shift with the regime and they tend to break right when you start relying on them, so any relationship you find describes the present and nothing more.

Check more than one window

A link that holds over ninety days but not over thirty means something changed recently. The difference between the two windows usually tells you more than either number on its own.

Compare the right things

Correlate yields on their daily change in basis points. Percentage returns are the wrong input for a yield, because a yield is a level rather than a price, and running ratio maths on a series with almost no drift distorts the answer. Prices correlate on percentage return as normal. Plenty of home built spreadsheets get this wrong.

Where the terminal fits

Helious has a cross-asset correlation matrix in one interactive card, covering the UST 10 year and 5 year, the S&P 500, the dollar index, gold, crude, high yield credit and the VIX, over 30, 60, 90 and 120 day windows. It uses the convention above, yields on their daily basis point change and prices on percentage return, so the numbers mean what you think they mean. Next to it sit the live curve, the calendar with alerts, every release scored the second it prints and a live news feed. It is $39.99 a month with a free tier, and the methodology page shows the workings.

Where to go next

For the rates themselves there is the rates page and the yield curve guide. For the shape of that curve, read steepening and flattening. The equity side is the Treasury curve for stocks and futures.

What moves the differential shows up on CPI, the FOMC hub and the calendar. And if you want another cross-asset read, try VIX, VVIX and implied volatility.