Dollar Soars as Inflation Fears and Rate Hike Bets Take Hold
The US dollar is holding strong at a two-month high after a robust manufacturing reading raised inflation fears and rate hike bets. The dollar index has reached 101.1, while the euro has fallen to $1.1378, its lowest level in two months.
A stronger-than-expected purchasing managers' report overnight has renewed concerns about price increases, while a poorly received auction of five-year US Treasury notes triggered fresh bond selling. The five-year yield has crossed 5% for the first time since 2007.
The Federal Reserve is likely to deliver more rate hikes given the strong economy and rising inflationary risks, according to Governor Michael Barr. This has led traders to increase bets on a second straight policy tightening next month, with nearly 70% chance of another hike in October, according to CME Group's FedWatch Tool.