Dollar Soars as Oil Prices Hit Four-Month Peak, Fed Hike Likelihood Rises
The US dollar is gaining strength as oil prices surge to over $105 a barrel. This has led to higher Treasury yields, which are now at their highest since 2007.
Benchmark US 10-year Treasury yields have risen by 4.1 basis points to 5.004 per cent.
The increased likelihood of a Federal Reserve interest rate hike is also contributing to the dollar's strength. Markets now see a Fed hike on Wednesday as nearly certain, with CME's FedWatch tool pricing in a more than 92 per cent chance of an increase.
This has led Francesco Pesole, FX strategist at ING, to comment: 'It's quite likely they will hike at this point. What's happening in the bond market is a warning signal, and if they decide to hold rates at this stage, it can lead to unwanted turmoil.'