Dollar Surges to Two-Month High Amid Rising Yields and Hawkish Fed

The U.S. dollar has reached a two-month high as rising Treasury yields and stronger economic data bolstered expectations for further Federal Reserve rate hikes.

Rising Treasury yields have been particularly notable, with the benchmark 10-year yield reaching its highest level since June 2004, while the 2-year yield hit nearly two decades of highs.

The yen has weakened toward the closely watched 160-per-dollar level amid renewed intervention risks. Japan's BOJ accelerated its tightening cycle in September but delivered a decision that included dissent on the board, with markets viewing it as insufficiently hawkish relative to the Federal Reserve's increasingly firm tightening outlook.

Aussie and yuan currencies have been under pressure due to weak economic data and rising inflation pressure. The Australian dollar fell 1.6% against the U.S. dollar this week, while the Chinese yuan spent three sessions below 6.70 for the first time since January 2023.