Dollar Rises as Hawkish Fed Comments Counter Crude Oil Price Drop

The US dollar index (DXY) rose by 0.20% on Monday due to hawkish comments from Fed officials. Chicago Fed President Austan Goolsbee and St. Louis Fed President Alberto Musalem stated that the Fed may need to raise interest rates further to restore price stability, which would benefit the dollar. However, a decline in crude oil prices by over 4% eased inflation expectations and could lead to looser monetary policy, potentially limiting dollar gains.

The yuan climbed to a 3.5-year high on Monday, undercutting the dollar's strength. US economic news showed the August Chicago Fed national activity index fell -0.12 to -0.04, in line with expectations. Markets are pricing in a 55% chance of a +25 bp Fed rate hike at the next FOMC meeting.

Precious metals, including gold and silver, settled lower on Monday due to the stronger dollar and hawkish Fed comments. A decline in global bond yields provided some support for precious metals prices.