Dollar Strengthens Amid Energy Price Stability and US Interest Rate Outlook

The US dollar has reached its highest level in July as it continues to be supported by elevated energy prices and short-end rates. Trump's confirmation at the UN General Assembly that an Iran deal must wait until after the November midterms has kept the dollar's consolidation intact, with DXY reaching 100.8.

The Treasury curve's compressed shape is also sustaining the greenback's advance, with the 10-year yield pressing towards 5% and the 2s10s spread sitting at just 21 basis points. This flat curve signals confidence in the Fed's policy credibility and preserves the dollar's real-rate advantage.

The clear threat to further dollar gains is from Tokyo, where USD/JPY is trading near 157 following last week's dovish Bank of Japan hike. Intervention by Japan's Ministry of Finance at or above 160 could pull the dollar lower.