Dollar Index Eyes 100 as Treasury Yields and Rate Expectations Rise

The US dollar index has been driven upward by rising Treasury yields and expectations of higher interest rates from the Federal Reserve. This is particularly evident in the two-year Treasury yield, which rose after comments from Fed officials suggesting that a quarter-point increase may be imminent by December.

A strong jobs report in August and sticky CPI inflation would further boost the odds of a September rate hike, potentially pushing the US dollar index above 100. However, a weak payroll report could reduce these chances and pull the index back toward the 98 area.

The Fed's hawkish outlook is already reflected in short-term yields, so confirmation from incoming data is necessary to sustain the dollar's upward momentum. The monthly chart for the US dollar index shows that it rebounded strongly after the Jackson Hole meeting to close above its 10-month simple moving average (SMA).