Dollar Surges to Nearly 1.5-Year High as Inflation Concerns Rise

The US dollar reached its highest level in nearly one-and-a-half years on Thursday, driven by concerns over inflation and rising yields. The dollar index, which tracks the greenback against a basket of six major peers, climbed 0.6% to 102.03, its highest since April 9, 2025.

The Institute for Supply Management's (ISM) report on the US manufacturing sector showed that prices rose to 77.9 in September from 71.1 in August, coming close to its 78.3 level in March at the start of the U.S.-Iran conflict. However, ISM's overall gauge of economic activity in the US manufacturing sector expanded for a ninth consecutive month.

The US Treasury bond market finally took a breather on Thursday, halting a steep selloff that had taken longer-term instruments to over 20-year highs. The yield on the 10-year Treasury note fell 6.5 basis points to end at 5.246%, while the yield on the 30-year Treasury bond slipped 2.3 basis points to settle at 5.616%.

The focus now turns to Friday's nonfarm payrolls report for further cues on the Federal Reserve's future interest rate actions. The data indicates a resilient labor market and cooling inflation, leading to a sharp reduction in October Fed rate hike bets.