Dollar index reaches three-month high amid fed caution

The dollar index maintained its recent rally at around 104.4 on Thursday, reaching its highest point in nearly three months amid increasing expectations that the Federal Reserve will adopt a more cautious approach to further interest rate cuts and rising speculation that former President Donald Trump may return to the White House.

Dollar index reaches three-month high amid fed caution

The dollar was also supported by rising Treasury yields, with the benchmark 10-year note hitting an intraday high of 4.26% on Wednesday. These movements followed vital US jobs, consumer inflation, and retail sales data, which suggested a robust economy. Fed’s Schmid expressed a preference against aggressive rate changes, while Fed’s Harker advocated for a more moderate approach to easing. Politically, markets are leaning towards the likelihood of a Trump victory in November.

Dollar and treasury yields rise on Trump’s inflationary policy expectations

This scenario could boost the dollar and Treasury yields due to his inflationary policies, including higher tariffs and lower taxes. As a result, the dollar reached a three-month high against the yen and a four-month high against the euro.