Dollar Strengthens as Yields Surge and Fed Bets Build

The US dollar is poised to post its first consecutive weekly gains in over three months as Treasury yields surge and bets on further Federal Reserve rate hikes intensify. This comes after the Fed tightened policy last week, with robust economic data and fresh energy supply concerns fueling expectations for more monetary tightening.

As a result, the dollar index has climbed more than one percent this week to a two-month high, marking its first back-to-back weekly gains since June. The euro is on track for its third consecutive weekly decline, with sterling languishing near a three-month low.

Khoon Goh, head of Asia research at ANZ, noted that 'whilst the dollar should get a bid from higher yields, there are still ongoing lingering concerns around the US fiscal position, the unpredictability of US policy making'. Oil prices jumped more than three percent on Thursday to a one-week high after a Houthi missile attack on Saudi Arabia revived fears of supply disruptions.

The Japanese yen continues to hover near a three-week low at 158.8 per dollar, despite hawkish comments from Fed speakers, including Philadelphia Fed President Anna Paulson and New York Fed President John Williams.