Stories
Dollar Soars to Best Month Since June on Aggressive Fed Hike Bets
- •The Bloomberg Dollar Spot Index has surged 1.8% in September, reaching a two-month high, driven by the Federal Reserve's focus on curbing inflation.
- •Strong US economic data, elevated inflation risks, and high energy prices due to the war in Iran have pushed Treasury yields to historical peaks, with the 30-year yield hitting its highest since 2002.
- •Markets are now pricing in nearly one percentage point of Fed rate increases over the next 12 months, further strengthening the dollar.
- •Fed officials, including Governor Michael Barr and New York Fed President John Williams, have reiterated the need for more rate hikes to control inflation.
- •While some indicators suggest the dollar may be overbought, traders are closely watching the upcoming September jobs report and the personal consumption expenditures price index for August to gauge future monetary tightening.
Key Questions Answered
The US dollar is wrapping up its best month since June due to the Federal Reserve's renewed focus on taming inflation, which has pushed interest-rate expectations and US bond yields higher. Solid economic data, heightened inflation risks, and elevated energy prices driven by the war in Iran have further strengthened the currency.
Traders are closely watching the September jobs report set for Friday and the personal consumption expenditures price index for August, which is the Fed's preferred measure of inflation.
All Group-of-10 currencies except the yen have weakened against the dollar in September. The yen has been supported by rising risks of Japanese authorities intervening in the foreign-exchange market and expectations of more rate hikes from the Bank of Japan.
