US Dollar Index nears one-month highs as geopolitical tensions and inflation fears boost Fed tightening expectations.
The US Dollar Index (DXY) climbed to 99.33, up 0.35% on Tuesday, driven by stalled US-Iran negotiations and rising expectations of a Federal Reserve rate hike. Oil price pressures and closed shipping routes in the Strait of Hormuz have amplified inflation concerns, supporting the dollar’s strength.
Markets now price a 35% chance of a 25 basis point Fed rate increase in October, rising to 42% for December, according to the CME FedWatch Tool. US Treasury yields surged in tandem, with the 10-year yield hitting a 16-month high of 4.687% and the 30-year yield reaching 5.197%, its highest since July 2007.
Traders remain focused on US-Iran talks, which remain deadlocked over Iran’s nuclear program. President Donald Trump warned that military action could resume if negotiations fail, adding to geopolitical uncertainty.