Dollar Soars as Oil Prices Jump and Bond Yields Rise
The US dollar gained strength on Tuesday following renewed US-Iran hostilities that pushed oil prices up by over 4%. The increased inflation worries and global bond selloff also fueled the greenback's rise. The dollar index rose 0.27% to 99.68, with the euro down 0.23% at $1.1589.
The 10-year Japanese government bond yield touched 3% for the first time in 30 years, while the yield on 10-year Treasury notes hit its highest since January 2025. Higher yields led investors to buy safe-haven currencies like the US dollar, undermining the case for riskier assets like equities.
Karl Schamotta, chief market strategist at Corpay, stated that a rout in global bond markets is intensifying and the dollar is climbing as an outbreak in hostilities between the US and Iran revives inflation risks. Fed funds futures traders now price in 68% odds of a September rate hike, up from 35% before Federal Reserve Chairman Kevin Warsh's hawkish speech at Jackson Hole.
August's jobs and consumer price inflation data will be key to whether the US central bank hikes next month. The jobs report on Friday is expected to show that employers added 56,000 jobs last month, according to the median estimate of economists polled by Reuters.