Dollar's Rebound Fails to Strengthen Broadly Amid Inflation Worries

Global markets have been reevaluating inflation data and expectations of interest-rate hikes. In the U.S., August CPI rose faster month-over-month, oil prices remained in triple digits, and Treasury yields climbed to multi-year highs.

Interest-rate futures markets have markedly increased bets on a rate hike next week, with 86% probability. The U.S. dollar index halted its decline and staged a modest rebound, with the USD/CHF leading gains. The yen strengthened on expectations of a Bank of Japan rate hike, while the euro remained weak.

Precious metals advanced, while crude oil retreated after a string of gains. The dollar's rally appears more like a technical correction, as divergence among non-U.S. currencies has widened. U.S. Treasury yields remain elevated, bolstering the dollar.