Dollar Edges Higher as Yields Climb and Fed Hike Talk Persists

The Dollar Index sits at 101.04, up 0.19% in a session still underway — the print reflects trading to roughly 2pm New York, about three hours before today's close, so it isn't the final tally. The move comes alongside a broad, if modest, rise in US Treasury yields: the 10-year is up 4.4bp to 5.158%, the 30-year up 4.9bp to 5.450%, the 5-year up 3.5bp to 5.032% and the 3-month up 2.9bp to 4.057%. Equities are softer — the S&P 500 down 0.12%, the Dow down 0.29%, the Nasdaq down 0.20% — while the VIX has jumped 4.15% to 15.81. Reuters reported that New York Fed President John Williams said it is reasonable to see another US rate hike this year, keeping the hike question — not a cut question — front and centre for dollar positioning.

Yields firmed across the curve today: the 3-month up 2.9bp to 4.057%, the 5-year up 3.5bp to 5.032%, the 10-year up 4.4bp to 5.158%, and the 30-year up 4.9bp to 5.450%. These are single-digit moves, not a repricing, but they're persistent enough to keep the dollar bid. The Fed lifted its target range 25bp to 3.75%-4.00% on September 16, its first hike since 2023, in a 12-0 vote. New York Fed President John Williams — who Reuters said sees it as reasonable to expect another US rate hike this year — is on today's calendar to speak at 19:15, with FOMC Member Schmid following at 23:20. One wire headline summed up the broader mood: "Another day, another bond market bloodbath".

EUR/USD is down 0.14% to 1.1368, extending Thursday's slide to a level near its weakest in nearly two months. GBP/USD is off 0.21% to 1.3212, following Thursday's close near a fresh 12-week low. USD/JPY is up 0.36% to 158.91, building on Thursday's push past 158 to a three-week high for the dollar against the yen. USD/CAD is up 0.27% to 1.4141, extending Thursday's advance to its highest level since late July.

EUR/USD trades at 1.1368, down 0.14% today, after Thursday's close held below $1.14 near its weakest level in nearly two months — part of a slide that has taken the pair down about 2.6% over the trailing month, per Trading Economics. The backdrop: the Fed's 25bp hike to 3.75%-4.00% on September 16 against the ECB's own 25bp increase on September 10 (deposit rate to 2.50%, main refinancing to 2.65%, marginal lending to 2.90%, effective September 16), which the ECB tied to inflation pressure from the Middle East conflict. Eurozone flash PMIs around September 23 pointed to a pickup in activity, and Germany's ifo business climate rose to 89.9 in September from 88.8, but neither has offset broad dollar demand. Today's euro-area calendar is thin: German GfK Consumer Climate (forecast -27.1, prior -26.6) at 16:00, then M3 money supply and private loan growth data at 18:00.

BOJ Core CPI y/y at 15:00 (forecast 1.5%, previous 1.6%); German GfK Consumer Climate at 16:00 (forecast -27.1, previous -26.6); Eurozone M3 Money Supply y/y and Private Loans y/y, both at 18:00 (forecasts 3.5% and 3.2%, previous 3.4% and 3.1%); BoE Governor Bailey speaks at 19:15, flagged high impact; FOMC Member Williams speaks at 19:15; US Durable Goods Orders m/m at 22:30 (forecast -0.3%, previous 1.1%) alongside Core Durable Goods Orders m/m (forecast 0.6%, previous 0.4%); FOMC Member Schmid speaks at 23:20.