Dollar Gains Ground Amid Rising Crude Prices and Higher T-Note Yields
The U.S. dollar is rising as crude oil prices surge by 3% to a 3.5-month high, increasing inflation expectations that could lead the Federal Reserve to raise interest rates at its upcoming meeting on September 15–16. The market currently assigns a 68% probability of a 25 basis point rate hike during this session. In addition, rising U.S. Treasury note yields are enhancing dollar appeal through improved interest differentials and boosting liquidity demand amid falling stock markets. The euro is under pressure as the stronger dollar and higher crude oil prices negatively impact energy-dependent economies like Europe’s. The European Central Bank (ECB) raised rates by 25 basis points to 2.50% and revised its 2026 GDP forecast upward, but this has only partially offset losses in the euro against a resilient U.S. dollar. Meanwhile, the yen is also weakening due to rising T-note yields and higher crude prices affecting Japan’s energy costs. The Bank of Japan (BOJ) faces expectations for another rate hike at its September 18 meeting, with markets assigning a 95% probability. The Japanese government pension fund may adjust asset allocations in response to bond yield increases.
Topics: crude oil prices dollar fed policy expectations treasury yields