Receding Fed rate hike expectations and Middle East tensions cap USD gains despite elevated US Treasury yields.
The USD/JPY pair remains below the 160 mark, trading near 159.60, as the US Dollar struggles amid diminished expectations for a Federal Reserve interest rate hike. The US Dollar Index (DXY) hovers around 99.62 after recovering from a two-month low of 99.30.
Elevated US Treasury yields provided temporary support, with the 10-year yield nearing 4.75% and the 30-year yield surpassing 5.30%, its highest since 2007. However, both yields retreated during US trading hours. Recent US economic data suggests moderating inflation, reducing bets on a September rate hike, though persistent oil price risks keep later hikes in play.
Geopolitical tensions in the Middle East, including threats to close the Strait of Hormuz, add uncertainty to the monetary policy outlook. Despite these risks, the USD remains pressured as markets reassess Fed policy expectations.