Dollar Index Climbs to 18-Month High Amid Persistent Federal Reserve Rate Expectations
The US dollar reached 102.56 as market participants anticipated another Federal Reserve rate increase before year-end.
The US Dollar Index reached an 18-month high near 102.56 on Monday, putting pressure on risk assets as Bitcoin traded around $83,000 and equity indices declined. Bitcoin shed nearly 3% over the week, coinciding with the 10-year Treasury yield hitting a 24-year peak of 5.35% on October 8 and weekly inflows of $166 billion into money-market funds.
The dollar's strength reflects expectations that the Federal Reserve will tighten monetary policy further from its current 3.75% to 4% target range. Futures markets indicate an 87% probability of a rate hike by December, reinforced by warnings from Cleveland Fed President Beth Hammack that sustained price pressures risk entrenching inflation across the economy.
Market attention is focused on Wednesday's Consumer Price Index release, where economists project headline inflation to accelerate to 3.7% from 3.4%, with core prices rising 0.2% on a monthly basis. While higher-than-expected inflation could strengthen the dollar and weigh on assets, a softer print could ease rate hike expectations, even as institutions like Goldman Sachs view elevated interest rates as a key near-term risk.
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