Dollar Strength Drives Yields Higher as Rate Hike Bets Surge
The US Dollar Index (DXY) is approaching its second week of gains, trading near 101.15 in early European hours on Friday. Despite a decline on the day, the index remains bullish, driven by surging US Treasury bond yields and rate hike bets.
US Treasury bond yields have hit their highest levels since June 2004, with the 30-year yield reaching 5.502% and the 10-year yield climbing to 5.225%. This has led to a strengthening greenback, which has reached two-month highs.
Markets are now pricing in a nearly 67.5% chance of a Federal Reserve (Fed) rate hike in October, up from 55.4% a week earlier and 11% a month ago, according to the CME FedWatch tool.
Khoon Goh, head of Asia research at ANZ, cautioned that while dollar strength may be driven by higher yields, ongoing concerns around US fiscal policy and unpredictability remain.