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US Dollar
Source: Newsmaker.id
The Dollar Index strengthened by approximately 0.4% to the 99.50 level during Monday's trading (Sept 14) as the market grew increasingly confident that the Federal Reserve would raise interest rates this week. The DXY approached 99.60 during the European session, but its upward momentum stalled as trading shifted to New York.
The yield on the 10-year US Treasury briefly breached 5%, yet this did not immediately drive the dollar higher. The market assessed that the rise in yields reflected not only a strong US economy but also rising government borrowing costs, substantial financing needs, investments in AI data centers, and inflationary pressures stemming from oil prices exceeding US$103 per barrel.
The dollar's interest rate advantage is also narrowing as other major central banks engage in monetary tightening. The ECB has raised rates to 2.50%, the Bank of Japan is expected to hike rates on Friday, and the Bank of England remains open to further tightening. Consequently, the interest rate differential between the US and other nations has not widened as much as the market had previously anticipated.
The Euro was a primary driver of the DXY's rise due to its significant weighting within the index. The EUR/USD pair fell to around 1.1500, its lowest level since mid-August. Meanwhile, the yen remained relatively strong after gaining approximately 4% over the month, supported by expectations of a BOJ rate hike and Japan's earlier large-scale intervention.
Newsmaker Analysis: The dollar's fundamentals remain supported by expectations of a Fed rate hike, high oil prices, and strong Treasury yields. However, the DXY is beginning to face upside resistance as other central banks also adopt increasingly hawkish stances. If the Fed delivers only a fully priced-in rate hike without additional hawkish signals, the DXY may once again struggle to break through the 100 level.
Source: Newsmaker.id