Precise Investors Editorial Team
The dollar index gained 0.11% to 99.79, its highest point since August 17
The dollar held near a two-week high on Wednesday as renewed hostilities in the Middle East drove oil prices higher, reviving inflation concerns and adding upward pressure on bond yields.
The dollar index gained 0.11% to 99.79, its highest point since August 17.
The U.S. currency’s appeal as a safe haven has been reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, even as recent economic data came in below forecasts.
Oil prices rose on Wednesday, extending the previous session’s surge, with Brent futures up 0.75% at $95.36 a barrel and U.S. West Texas Intermediate (WTI) crude 0.41% firmer at $90.62.
The yield on the benchmark U.S. 10-year note rose to as high as 4.812%, its firmest since November 2023, before retreating to 4.804%. Japan’s benchmark 10-year yield extended its rally to 3.01% on Wednesday after reaching a three-decade milestone of 3% on Tuesday.
U.S. yields have been creeping higher again, lending support to the U.S. dollar, said Daisuke Shimazu, chief market strategist at Sumitomo Mitsui Trust Bank.
Higher yields drive investors to buy safe-haven currencies, while undermining the case for riskier assets like equities.
Meanwhile, the New Zealand dollar plunged 1.01% against the U.S. dollar to $0.5844, its lowest point since August 13, even after the country’s central bank raised its official cash rate by 25 basis points to 2.75%. Analysts said market participants viewed the decision as less hawkish than expected.
Relative to where markets were and what they might have expected, it doesn’t meet their expectations, said Westpac New Zealand strategist Imre Speizer.
Markets are now pricing in a 68% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group’s FedWatch tool.
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