Dollar Firms to 100.65 as Fed's Hiking Path Outpaces Peers

The US Dollar Index firmed to 100.65, up 0.22% on the day, extending the broad dollar bid that followed the Federal Reserve's September 16 rate hike. The move was modest in isolation but fits a pattern across the majors: the euro, pound and Canadian dollar all softened against the dollar in the last completed session, while the yen extended a multi-day slide of its own. US equities were mixed — the S&P 500 edged up 0.08% and the Nasdaq rose 0.45%, while the Dow slipped 0.32% — and the VIX fell 4.30% to 14.23, suggesting the dollar's firmness isn't being driven by broad risk-off flows.

Treasury yields ticked higher but not dramatically: the 10-year rose 1.1bp to 4.974%, the 30-year 0.6bp to 5.302%, the 5-year 1.5bp to 4.849%, and the 3-month 2.6bp to 4.008% (Yahoo reference). The bigger repricing sits behind those moves: the Fed lifted its funds target 25bp to 3.75%-4.00% on September 16, a 12-0 vote whose Summary of Economic Projections showed 16 of 18 FOMC participants signalling at least one further hike this year. Fed commentary stayed on that theme — an AFR headline framed the Fed as declaring the era of abnormally low rates over, Reuters reported Fed's Williams saying the rate-control toolkit is working well, and Investing.com reported Fed's Barkin saying the economy is firming while inflation risks persist. The live policy question remains further hikes, not cuts.

EUR/USD trades at 1.1443, down 0.32%, near multi-month lows as the Fed's September 16 hike to 3.75%-4.00% is seen outpacing the ECB's September 10 hike to a 2.50% deposit rate. GBP/USD sits at 1.3332, down 0.42% and near a seven-week low, weighed by the BoE's 6-3 vote to hold Bank Rate at 3.75%. USD/JPY is at 157.40, up 0.23%, the yen softer even after the BoJ's September 18 hike to 1.25%. USD/CAD trades at 1.4075, up 0.58%, the loonie pressured by WTI crude's 5.11% drop and a Bank of Canada on hold at 2.25%.

USD/JPY is the day's clearest rotation story, trading at 157.40 (+0.23%), the yen extending its post-BoJ softness. The pair sits between two forces: the Bank of Japan's September 18 hike to 1.25% — its highest since 1995, passed 7-2 with dovish dissents from board members Toichiro Asada and Ayano Sato — and a US-Japan rate gap desk analysts peg near 275bp (UBP's Carlos Casanova), which keeps yen-funded carry demand intact. Vice Finance Minister Atsushi Mimura has said authorities are "neither satisfied nor reassured" by yen moves, and Nikkei reported a BoJ rate check with market participants on September 18. Tokyo is closed today for Autumnal Equinox Day; the next scheduled Japan data is tomorrow's flash Manufacturing PMI, alongside US flash PMIs and Fed speakers due later today.

Today's calendar is Europe-and-US heavy: French flash Manufacturing (forecast 50.9, previous 51.5) and Services PMIs (48.3/48.4) at 17:15, German flash Manufacturing (54.1/54.1) and Services PMIs (49.9/48.5) at 17:30, Eurozone flash Manufacturing (52.6/52.8) and Services PMIs (51.4/51.7) at 18:00, and UK flash Manufacturing (51.5/51.5) and Services PMIs (52.0/52.8) at 18:30. A German 30-year bond auction follows at 19:34, then US flash Manufacturing (53.6/53.2) and Services PMIs (55.8/56.8) at 23:45. Tomorrow (Sydney time): FOMC Member Barr speaks, US crude oil inventories data, Japan's flash Manufacturing PMI, and Australia's employment change and unemployment rate.