Dollar Continues to Dominate as Markets Eye China Summit

The US Dollar continues its upward trend, holding steady above 101.00 after rising more than 0.5% on Wednesday and closing at its highest level in two months. The USD Index is supported by upbeat data and hawkish remarks from Federal Reserve Governor Michael Barr, who stated that 'further rate hikes [are] likely needed' to control inflation.

The benchmark 10-year US Treasury bond yield rose more than 3% on the day, climbing to its highest level since July 2007 above 5.1%, and further supporting the USD. The S&P Global Composite Purchasing Managers' Index (PMI) in the US rose to 58.4 in September's flash estimate from 56 in August, indicating a further expansion of the private sector's business activity at an accelerating pace.

ING's FX strategists note that the Dollar 'jumped yesterday, with DXY breaking above 101.0,' but caution that 'the move is starting to look stretched relative to fundamentals.' They suggest scope for consolidation if the data pulse cools or risk appetite stabilizes.