Dollar Gains Ground Amid Rising Treasury Yields and Stock Declines
The U.S. dollar strengthened on September 1, supported by rising Treasury note yields that improved interest rate differentials and a decline in stock markets which increased liquidity demand for the greenback. A sharp rise of over 2% in WTI crude oil prices to a six-week high also raised inflation expectations, potentially prompting further Federal Reserve tightening. However, dollar gains were tempered by weaker-than-expected U.S. economic data including an August ISM manufacturing index that fell below forecasts and a decline in July construction spending. Despite this, hawkish comments from Fed Governor Michael Barr reinforced market expectations of a 65% probability for a rate hike at the September FOMC meeting. The euro weakened against the dollar amid downward revisions to Eurozone economic indicators such as manufacturing PMI and German retail sales. However, rising crude oil prices and higher inflation data in the region supported some resilience in the euro.
Topics: dollar inflation expectations interest rates stock market treasury yields