Fed and Oil Shock Push DXY Toward 100

The US dollar surged during Monday's trading (Sept 14), reaching a nearly two-week high as markets grew increasingly confident that the Federal Reserve would raise interest rates this week. The dollar index rose approximately 0.55% to the 99.55 level, recovering some of the ground lost over the previous two weeks.

The dollar's strengthening put pressure on other major currencies. The EUR/USD pair fell about 0.5% to the 1.1500 area, a low not seen in nearly two weeks. Meanwhile, USD/JPY rose 0.65% to around 154.55, following the yen's earlier strong gains. Despite this correction, the yen remains up about 4% for the month of September.

Markets are pricing in an approximately 86% probability that the Fed will raise interest rates by 25 basis points. These expectations strengthened after US inflation held steady at 3.4% and Core CPI rose 0.3% month-on-month. The yield on the 10-year US Treasury note even briefly breached 5%, while markets also began factoring in the possibility of a further rate hike in December.

Foreign exchange market focus this week is not solely on the Fed; the Bank of England and the Bank of Japan are also set to announce interest rate policies. The BOJ is expected to raise rates by 25 basis points to 1.25%, meaning the yen's trajectory remains highly sensitive to the Japanese central bank's policy guidance.

A surge in oil prices has further intensified inflationary pressures. Brent crude rose about 3% to near US$112 per barrel following attacks on Saudi Arabian pipeline infrastructure and increased Houthi activity in the Red Sea.

Newsmaker Analysis: The combination of high oil prices, persistent inflation, and the prospect of a Fed rate hike maintains a bullish bias for the dollar. If the DXY can hold above 99.50, the 100 level is likely to be tested again. (arl)

Source: Newsmaker.id