Dollar Posts Best Monthly Performance Since March as Fed's Anti-Inflation Stance Boosts Rate Hike Expectations

Jin10 Data, October 1 — The U.S. Dollar Index rose nearly 2% in September, marking its best monthly performance since March. The Federal Reserve has refocused its policy on curbing inflation, driving market expectations for rate hikes and pushing U.S. Treasury yields higher, providing support for the dollar. Although the latest PCE inflation data came in below expectations, leading traders to lower the likelihood of a rate hike in October, the market has fully priced in a December rate hike and anticipates approximately 90 basis points of tightening by the Fed over the next 12 months. Federal Reserve officials have also continued to send hawkish signals recently, with New York Fed President Williams stating that another rate hike later this year "might be appropriate." Meanwhile, U.S. economic data remains strong, and the Iran conflict has driven up energy prices, exacerbating inflation risks. The yield on 30-year U.S. Treasury bonds reached its highest level since 2002 this week. In September, all G10 currencies except the Japanese yen depreciated against the dollar. However, some technical indicators suggest that the dollar's rally may be starting to overextend, as momentum indicators have entered overbought territory.