USD Consolidation Hinges on Fed's Next Move Amid Oil Price Volatility
US Dollar Index (DXY) has been consolidating around 99.5 levels, supported by higher oil prices and elevated US Treasury yields. According to OCBC strategist Christopher Wong, this stability comes amidst softer risk sentiment.
The combination of higher oil prices, rising US yields, and weaker risk appetite has helped lift the USD broadly. Brent crude pushed back above $108 per barrel as concerns over Middle East supply disruptions resurfaced. The 10-year US Treasury yield also crossed 5%, keeping rate support for the USD intact.
However, Wong notes that further USD upside is likely to require the Federal Reserve to keep open the option of additional tightening. With a hike now heavily priced in, the Fed's decision will be crucial in determining the direction of the US Dollar.