The US dollar has firmed as Treasury yields have reset rate expectations, with the 10-year briefly touching about 5.15%, a peak last seen in 2007, and the 30-year reaching a level not seen for more than two decades. By Friday morning, the Dollar Index was near 101.30–101.40, while EUR/USD traded around 1.1380 and USD/JPY approached 159.00, and sterling sat close to a three-month low. The move reflects divergence between the Federal Reserve and other central banks, but it also tightens financial conditions through higher borrowing costs and tougher equity valuation maths, particularly if rising long-end yields are driven by inflation uncertainty, fiscal concerns or a higher term premium rather than stronger growth.
Energy has added another strain, with Brent crude back above $100 a barrel, complicating the inflation outlook even as rates cannot address supply disruptions. US data have reinforced resilience, with the preliminary composite PMI rising to 58.4 from 56, and initial jobless claims falling to 197,000, which can translate into expectations for rates to stay higher for longer. Elsewhere, gold eased towards $4,200–$4,250 an ounce as yields and the dollar lifted the opportunity cost. Markets now look to US durable goods orders and the final University of Michigan sentiment report, ahead of Bank of Japan minutes on 28 September.
