Persistent high real yields and a hawkish Fed stance limit USD downside despite slight easing in Treasury yields.
The US Dollar remains supported by elevated real yields and a “high-for-longer” interest rate outlook. US Treasury yields have eased marginally but remain above 4% for both 2-year and 10-year maturities, reinforcing USD strength and pressuring Asian currencies.
Market expectations still reflect a potential Federal Reserve rate hike in October, with limited downside for the Dollar unless US economic data weakens or the Fed signals a dovish pivot. Core PCE inflation above 3% and resilient labor market conditions underscore the Fed’s hawkish stance under Chair Kevin Warsh.
Real yields, adjusted for breakeven inflation, continue to anchor USD demand, suggesting sustained strength even if nominal yields stabilize. The broader rates backdrop remains unchanged, keeping Asia FX under pressure.