Dollar Surges to Two-Month High on Rising Yields and Global Concerns

The US dollar strengthened to a two-month high on Thursday, driven by rising US Treasury yields. This increase in yields was partly due to concerns over persistent global price pressures stemming from the Middle East war.

Data released earlier showed that US inflation rose less than expected in August, with downward revisions to July's reading also reducing expectations for a Federal Reserve rate hike this month. However, a surge in euro zone inflation highlighted the ongoing threat of higher energy prices to the global economy.

Against the dollar, the euro was marginally lower at $1.1330 in early Asian trading, having lost nearly 2.5% in September. Sterling was flat at $1.3264 after sliding 2.1% last month, also weighed down by a stronger greenback. The dollar was near a two-month high against a basket of currencies and stood at 101.48.

Ray Attrill, head of FX strategy at National Australia Bank, noted that while the recent US PCE numbers offered some comfort, it did not necessarily mean there wouldn't be more Fed hikes ahead. He also observed that the US dollar was showing increased sensitivity to changes in 10-year Treasury yields.