Dollar Climbs To Nearly Two-Month High
The U.S. Dollar Index (DXY) rose as high as 101.10 on Wednesday, 23 September, its strongest level since July. The gain came as traders added to bets on further Federal Reserve tightening and Treasuries sold off sharply.
Fed Hike Expectations Drive The Move
The Fed raised rates by 25 bps last week, its first hike in three years, and officials have since suggested more may be needed. Futures traders now see a 53% chance of another increase in October, according to CME Group data. Stronger-than-expected September PMI readings reinforced the view that the U.S. economy is running hot.
Market Data And Reaction
The U.S. 10-year Treasury yield rose about 16.8 bps to 5.11%, after briefly topping 5.12%, its highest since 2007. Currency pairs followed yields. EUR/USD fell 0.6% to 1.1382, dropping below 1.14 for the first time since late July. USD/JPY rose 0.6% to 158.34.
Broader Market Implications
Higher U.S. yields widen the return gap over the euro and the yen, which explains the pressure on both currencies. The move also weighed on risk sentiment, with U.S. equities lower as bond yields climbed. The dollar kept its gains even as oil prices swung during the session, which shows the rate outlook is the main driver.
What Forex Traders Should Watch
- Fed commentary and October pricing: Further remarks from Fed officials could shift market-implied odds of another hike.
- The 5% level on the 10-year yield: Yields have been holding near this threshold, and Treasury demand at upcoming auctions will show how the bond market is coping.
- USD/JPY near 160: Traders may grow more cautious about a possible response from Japanese authorities as the pair approaches 160.
- Trump–Xi talks: Currency markets were cautious ahead of Chinese President Xi Jinping’s arrival in Washington for talks with President Trump
