Rising Dollar Raises Global Concerns

8 Oct 2024 , 10:54 AM

The dollar held near seven-week highs versus major currencies on Tuesday as investors considered the prospects for US interest rates after a solid employment report last week dashed hopes for substantial rate cuts, while growing tensions in the Middle East dampened risk sentiment.

The benchmark 10-year US Treasury yield held above 4% in Asian hours, having reached the level on Monday for the first time in two months as traders reduced their bets on large rate cuts.

Traders’ expectations for monetary easing from the Federal Reserve have moved dramatically this year.

Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said on Monday that he supports future interest rate decreases as the economy continues to grow, but that the central bank should exercise caution and not overdo monetary easing.

Markets are no longer completely pricing in a rate cut in November, with an 86% chance of a 25 basis point (bps) reduction, according to the CME FedWatch tool. Only 50 basis points of easing are expected by December, down from more than 70 basis points just a week ago.

The dollar index, which measures the US currency against key rivals, was last at 102.41, barely below the seven-week high of 102.69 set on Friday.

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