Dollar Index Hits 99.5 Amid Expectations of Tighter Fed Policy

The US dollar index surged to 99.5 on Friday, marking an extension of its rebound from the three-month low of 98.8 reached on August 21st.

This increase is attributed to several factors, including a rise in short-term Treasury yields following comments from Fed Chairman Kevin Warsh that the central bank will take a firmer stance against inflation.

Warsh stated that underlying inflation has not significantly decreased over the past few months and emphasized that the labor market appears to be at full employment.

The PCE index, used as an inflation gauge by the Fed, is also being closely tracked, with Warsh using stricter rhetoric than previously suggested.

Rate futures indicate a shift towards expecting a Fed rate hike next month, and revised annual nonfarm payrolls figures showed robust employment.