US Dollar Soars to Three-Month High on Hawkish Fed Outlook
The US Dollar (USD) surged to its highest level in over three months as upbeat business activity data reinforced expectations of another Federal Reserve rate hike. The preliminary S&P Global US Composite Purchasing Managers’ Index (PMI) rose to 58.4 in September from 56 in August, while Manufacturing PMI climbed to 57, beating the 53.5 forecast.
US Treasury yields jumped to fresh multi-year highs, with the benchmark 10-year yield rising to around 5.13%, its highest level since 2007. The rate-sensitive 2-year yield also climbed to 4.94%, its highest level since 2024.
The hawkish Federal Reserve outlook keeps the US Dollar in demand, with expectations of additional tightening and persistent inflation concerns pushing borrowing costs higher. Fed Governor Michael Barr stated that “inflation is not clearly trending toward our target in a timely way,” while “economic growth is strong” and “the labor market is solid.”
The Japanese Yen (JPY) continues to decline against the US Dollar, with USD/JPY climbing to a three-week high of 158.18. Elevated Oil prices linked to the war in the Middle East keep inflation risks tilted to the upside.