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US Dollar
Source: Newsmaker.id
The US dollar strengthened sharply in Monday's trading (Sept. 14), on track for its best daily gain since June 17. The Bloomberg Dollar Spot Index rose as much as 0.6% ahead of the Federal Reserve's interest rate decision on Wednesday, following relatively flat movement on Friday.
The dollar's rally was supported by rising US Treasury yields. The 10-year Treasury yield climbed for the fifth consecutive session, breaching the 5% mark—its highest level since 2023. Meanwhile, WTI oil prices remaining above US$100 per barrel kept inflation concerns elevated and reinforced expectations of a hawkish Fed policy.
All major G-10 currencies weakened against the dollar. The New Zealand dollar and Swedish krona fell by approximately 1%, while the Japanese yen weakened by more than 0.8%, marking its worst daily drop in a week. Options markets are also showing an increase in positions anticipating further dollar appreciation.
However, the scope for further dollar gains is seen as limited. Markets have already priced in around 100 basis points of Fed policy tightening over the next 12 months. This implies that a hawkish decision on Wednesday might not provide the same level of boost as before, since much of that expectation is already reflected in market prices.
Newsmaker Analysis: A combination of Treasury yields above 5%, oil prices exceeding US$100, and hawkish Fed expectations continues to support the dollar ahead of the FOMC meeting. However, given that markets have already factored in aggressive tightening expectations, investor attention will likely shift toward forward guidance. If the Fed proves less hawkish than anticipated, the dollar risks facing a profit-taking sell-off. (arl)
Source: Newsmaker.id