Dollar Surges to Two-Week High Amid Oil Price Bounce and Fed Hike Expectations

The US dollar has reached near two-week highs as oil prices surge to $107 a barrel, pushing Treasury yields above 5% for the first time since October 2023. This inflation-driven pressure on the Fed is expected to lead to an interest rate hike on Wednesday.

CME's FedWatch tool shows that markets now see a hike as nearly certain, with a roughly 93% chance of an increase in interest rates. The dollar index, which measures the greenback against a basket of currencies, was last at 99.55.

The euro and sterling were slightly weaker against the dollar at $1.1538 and $1.3494 respectively, while the yen pulled away from its seven-month high due to an expected Bank of Japan rate hike on Friday.