Dollar Strengthens Near Two-Month High Amid Interest Rate Hike Expectations

The US dollar strengthened on Thursday, remaining near its two-month high after a sharp rally fueled by expectations of further interest rate hikes from the Federal Reserve. The Dollar Index rose 0.1% to 101.2 points, its highest level since July 29.

Strong business activity data and hawkish tone from central bank officials have contributed to the dollar's strength, with US two-year Treasury yield climbing to its highest level since May 2024.

Francesco Pesole, FX strategist at ING, noted that the move is starting to look overstretched relative to fundamentals, but added that any upside surprise in upcoming US data could push markets to fully price in an October rate hike by the Federal Reserve.