Dollar Slides to 98.73 as Oil Shock Lifts Global Yields
Brent crude holds above $100 a barrel, pushing 10-year Treasury yields to their highest levels since 2023. The dollar index fell to 98.73 despite expectations of a Federal Reserve hike.
The dollar index declined to 98.73 on Thursday. This reversal erased earlier intraday gains. The drop occurred as global bond yields climbed sharply. Brent crude futures remained above $100 a barrel. This sustained energy price level increased inflation risks worldwide.
The 10-year U.S. Treasury yield reached its highest point since 2023. This move followed a disappointing bond buyback program. Traders are pricing in a 60% probability of a Federal Reserve rate hike this month. This shift in expectations follows a stronger-than-expected nonfarm payrolls report.
Oil Prices Drive Yield Increases
Energy costs are the primary driver of the current yield surge. Brent crude breached the $100 mark on Wednesday. It has remained above this threshold since then. The rise follows the largest wave of attacks on shipping between Iran and the U.S. since the start of the conflict. These events threaten to disrupt energy supplies from the Middle East.
Higher energy prices are adding new inflation pressure. This pressure is forcing global bond yields back on an upward path. The market response is visible in the U.S. Treasury market. Yields rose as investors adjusted their outlook for future monetary policy.
Central Banks Prepare for Hikes
The European Central Bank is expected to raise interest rates on Thursday. This would be the second increase this year. The bank is likely to signal readiness for further tightening. This stance reflects concerns that the inflation outlook may not improve.
The Bank of Japan is also poised for action. It is expected to hike rates to 1.25% on September 18. Forecasts suggest a further increase to 1.75% in the second quarter of 2027. The yen strengthened to 153.35 against the dollar. This level represents a seven-month high for the currency.
Inflation Data Shapes Policy Expectations
Market attention turns to upcoming U.S. inflation data. Producer price data is due later on Thursday. Consumer price data will be released on Friday. These figures are the last major releases before the Federal Open Market Committee meets on September 15 and 16.
The euro edged up to $1.1639. Sterling rose to $1.3555. The dollar found little support despite its traditional safe-haven status. Analysts note that markets are becoming less reactive to oil shocks. Background factors like central bank tightening are also weighing on the greenback. This trend is consistent with the data reported by GN markets.
