Dollar Gains on Fed Hawkishness and Strong US Economy

The US dollar is experiencing broad gains due to a combination of factors. According to Brown Brothers Harriman's Elias Haddad, the Federal Reserve's hawkish stance and strong economic performance are major contributors. The September PMI data beat expectations for other major economies, with the US composite PMI reaching a 62-month high at 58.4.

This outperformance is reflected in higher real Treasury yields, which have surged to 5.14%, the highest level since July 2007. Fed Governor Michael Barr and New York Fed President John Williams have warned that further policy adjustments are likely needed to ensure inflation comes down to target in a timely fashion.

The US-China trade truce has also contributed to the dollar's gains, with Treasury Secretary Scott Bessent confirming an extension until January 10. However, Bessent questioned whether a bigger trade deal can be done.