The US dollar remains at 10-month highs against major currencies due to rising US bond yields. The 10-year Treasury yield has reached over 4.5%, the highest since 2007, as a result of strong economic data, hawkish Federal Reserve rhetoric, and a budget deficit that needs to be financed through borrowing. This has prompted investors to bet on another interest rate hike by the Fed this year, supporting the dollar. As a result, the euro and the Chinese yuan are particularly vulnerable to the bullish dollar trend.
Meanwhile, the Swiss franc has fallen to its lowest level since June after the Swiss central bank unexpectedly kept short-term rates steady. The Japanese yen has also continued to slide toward 150 yen per dollar, which is a key level that could trigger intervention by the Japanese government. There are concerns that central banks beyond the Fed may be reaching the end of their hiking cycles, contributing to the pressures on these currencies.
Rising commodity prices have provided some support to antipodean currencies, such as the Australian dollar and the New Zealand dollar. However, these currencies have mostly traded sideways over the past month. The Chinese yuan, on the other hand, has come under pressure due to fears of a slowdown in the country’s property market. Despite the potential for a US economic slowdown, the dollar is expected to find support due to concerns over weak global growth. The dollar’s strength is unlikely to wane unless there are clear signs of Fed rate cuts on the horizon.