Dollar Index Surges Past 100 as Fed Hike Expectations Rise
The US Dollar has strengthened its position in the foreign exchange market after the Federal Reserve's decision to begin tightening monetary policy. This move has lifted the Dollar Index above 100.00 for the first time since August 1.
The rise of the Dollar is largely attributed to a significant increase in US yields, with the 2-year Treasury bond yield increasing by around 55bps since late last month.
This upward trend reflects market expectations of an extended rate hike cycle, with three more Fed hikes expected over the next year. Hawkish remarks from regional Fed presidents have reinforced these expectations.
Chicago Fed President Goolsbee emphasized that supply shocks to inflation are becoming persistent and need policy restraint to prevent inflation from exceeding its 2% target in 18 months.