Dollar Soars as Bond Yields Hit Decade Highs

The US dollar has been gaining strength over the past week, reaching near 18-month highs as bond yields surge. The greenback's rise was driven by a sharp increase in global bond yields, which have climbed to their highest levels since 2007. This shift is largely attributed to rising US Treasury yields, fueled by persistent inflation and resilient economic growth.

The strong US dollar has also been bolstered by the country's robust growth story, with the S&P Global Flash US composite PMI reaching its strongest reading in over five years in September. The report showed that both services and manufacturing activity were strengthening, with firmer hiring and rising input costs contributing to elevated inflation pressures.

The Australian dollar was one of the hardest-hit currencies last week, with AUD/USD down 1.4%. This week's focus is on Tuesday's interest rate decision by the Reserve Bank of Australia (RBA), with markets expecting a rate hike to take the cash rate to 4.60%, its highest level in over a decade.