Dollar Dominance Grows Amidst Global Sovereign Debt Sell-Off
The US dollar has extended its dominance in foreign exchange markets, reaching near two-week highs as global sovereign debt experiences a significant sell-off. Benchmark yields have surged to multi-year peaks, with short-term US interest rates reassessing after Federal Reserve Chair Kevin Warsh's hawkish keynote at Jackson Hole.
The greenback's resilience reflects a sharp re-pricing of short-term US interest rate paths, now implying a 74% probability of a 25-basis-point Fed rate increase at the September 17 policy gathering. This represents a significant acceleration from 34% prior to Warsh's address.
The euro has slipped as energy-driven headline inflation masks softer core CPI data. The Eurozone's Consumer Price Index accelerated to 3.3% year-on-year in August, while underlying core CPI eased unexpectedly to 2.4% year-on-year from 2.5%. The yen has crept up near the 160 threshold, receiving brief support from US Treasury Secretary Scott Bessent's comments urging Bank of Japan Governor Kazuo Ueda to raise interest rates.