Dollar Rises as Traders Bet on US Rate Hike This Week
The US dollar has strengthened as traders bet on a Federal Reserve rate hike this week, causing Asian currencies to weaken. The Fed's decision is expected to have a significant impact on global monetary policy in the final months of the year.
Markets now see an 86% probability of a Federal Reserve rate hike at its September 16 meeting, according to CME FedWatch. This has supported the dollar and pushed Treasury yields higher. The two-year yield, which is particularly sensitive to Fed expectations, remained above 4.6%. The US dollar index was around 99.35, up 0.2%, after rising 0.12% on Friday.
The yen has held near a seven-month high as markets position for tighter Bank of Japan policy. Investors expect the BOJ to deliver another 25-basis-point hike this week, which would leave guidance on the pace of subsequent tightening as the key question for the currency. The yen's 4% gain this month has also started to change market positioning.