Dollar Strengthens as Yields Rise and Geopolitics Tighten

The US dollar has been rising due to increasing bond yields and geopolitical risks. The DXY index, which tracks the dollar's value against a basket of other major currencies, is approaching its previous peak at 101.80 and is expected to continue upward momentum if it breaks through this level.

Rising global bond yields have contributed to the dollar's strength, as investors seek higher returns in a low-interest-rate environment. Geopolitical tensions and higher energy prices are also putting upward pressure on the dollar. Additionally, expectations of a Federal Reserve rate rise are supporting demand for the dollar.

The overnight index swap pricing implies a 35% probability of a Fed hike next week. Japan's yields have continued to edge higher as the Bank of Japan proceeds with gradual policy normalization. The country's core-core nationwide CPI rose 1.7% year on year in June, and the adjusted measure also increased.