Dollar Surges as Fed Expected to Maintain Tightening Path

The US Dollar has outperformed its major currency peers after strong United States Treasury Yields on expectations that the Federal Reserve will remain on the monetary tightening path even after hiking interest rates at the policy meeting on Wednesday.

The US Dollar Index (DXY) trades 0.16% higher to near 99.62, and 10-year US Treasury Yields have hit record highs at 5.04%, the highest level seen in the last 19 years.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates by 25 basis points (bps) to 3.75%-4.00% on Wednesday are 92.5%. The tool also shows a 78.65% chance that the Fed will deliver at least two interest rate hikes within this year.

Financial market experts have repriced Fed interest rate expectations for the near and medium term, seeing more hikes this year and in 2027 as well on the back of elevated inflationary pressures.