Fed Hike Bets Clash with Yen Intervention Trapping DXY Near 100

The US Dollar Index (DXY) is stuck near 100.02 as it battles to reclaim the psychologically important level of 100.

Markets are pricing a 54% chance of a September Federal Reserve rate hike, but official selling pressure and falling oil prices are weighing on the dollar.

The latest ISM data showed a blowout reading for July's manufacturing PMI, which jumped to 55.6, its strongest since May 2022. This has turned fundamentals in favor of a higher dollar, with three Federal Open Market Committee members dissenting in favor of a rate hike in July.

The coordinated yen intervention by the US and Japan is also pulling against the dollar, as USD/JPY weakened to 40-year lows near 164.