Dollar Dominance Continues as Global Yields Reach Multi-Year Peaks
The US dollar continued its dominance in foreign exchange markets on Tuesday, nearing two-week highs as global sovereign debt yields reached multi-year peaks.
This has strengthened expectations that the Federal Reserve will resume monetary tightening in September. The greenback's resilience is attributed to a re-pricing of short-term US interest rate paths following Federal Reserve Chair Kevin Warsh's hawkish keynote at Jackson Hole, which sent 2-year Treasury yields up 3 basis points to 4.80% - their highest level since January 2025.
The probability of a 25-basis-point Fed rate increase at the September 17 policy gathering has accelerated to 74%, from 34% prior to Warsh's address, leaving lower-yielding peer currencies vulnerable to widening interest rate differentials.