Dollar Soars as US Yields Rise Amid Extended Rate Hike Expectations

The US Dollar has gained strength after the Federal Reserve began tightening monetary policy. The Dollar Index has risen above 100.00, its highest level since August 24th. This increase is partly due to a sharp rise in US yields, with the 2-year Treasury bond yield up by around 55bps.

The market expects three more Fed rate hikes over the next year, which has led to an adjustment higher in US yields. Regional Fed presidents have also made hawkish comments, supporting expectations for an extended rate hike cycle.

Chicago Fed President Goolsbee stated that supply shocks have become more frequent and severe, making it harder to 'look through' inflation. St Louis Fed President Musalem emphasized the need for policy restraint on inflation, warning that without it, prices are likely to be substantially above 2% in 18 months.