Dollar Surges as Oil Prices Jump and Inflation Fears Rise
The US dollar strengthened on Tuesday after renewed U.S.-Iran hostilities sent oil prices higher and fueled inflation worries. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.27% to 99.68.
The 10-year Japanese government bond yield touched 3% for the first time in 30 years, while the yield on 10-year Treasury notes hit its highest since January 2025. Higher yields drove investors to buy safe-haven currencies like the US dollar while undermining the case for riskier assets like equities.
Fed funds futures traders are now pricing in 68% odds of a September rate hike, up from 35% before Federal Reserve Chairman Kevin Warsh's hawkish speech on monetary policy at the Jackson Hole symposium on Friday. August's jobs and consumer price inflation data, both due before the Fed's September 15 to 16 meeting, may be key to whether the US central bank hikes next month.