Insights 
VT 
The US Dollar Index (DXY), which measures the USD against a basket of six currencies, is trading around 99.75 during early Asian trading hours on Monday. This rise is attributed to a hawkish stance from the US Federal Reserve as traders anticipate the release of the US October ISM Manufacturing PMI report.
The Federal Reserve recently decreased interest rates by 25 basis points, but indicated this may be the final rate cut of the year. This decision was influenced by the need to understand the economic landscape further before adjusting rates again.
Federal Reserve Officials Remarks Impact
Remarks from Fed officials who opposed the rate cut, like Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack, have contributed to the USD’s strength. The market’s expectation of a December rate cut has decreased, with only a 68% probability down from 93% the previous week.
The ongoing US government shutdown, entering its sixth week, could potentially lower the DXY. The US Dollar is the official currency of the United States and is widely used globally, holding 88% of all foreign exchange transactions, averaging $6.6 trillion daily as of 2022. Economic indicators and Federal Reserve monetary policy continue to affect its value.
Looking back at this time a year or two ago, we saw the US Dollar Index strengthening past 99.50 as the Federal Reserve hinted at a pause in rate cuts. Today, on November 3, 2025, the situation is quite different with the DXY holding steady around 106.30. This highlights a period of sustained dollar strength that was driven by a higher-for-longer interest rate environment throughout 2024.
The hawkish stance from officials back then was a clear signal of the fight against inflation that followed. We’ve seen the results, with the latest Core PCE for September 2025 coming in at a sticky 2.8%, still well above the Fed’s target. With the unemployment rate having drifted up to 4.2% in the latest jobs report, the central bank is in a difficult position, holding rates steady for now.
Impact of Treasury Yields on the Dollar
This creates a challenging environment where the Fed’s next move is genuinely uncertain, a contrast to late 2023 when the market was mainly pricing in the timing of cuts. For derivative traders, this points towards strategies that benefit from volatility, as any major data release could cause sharp swings in the dollar. Options strategies like straddles or strangles on major currency pairs like EUR/USD could be useful to capitalize on this uncertainty.
The yield on the 10-year US Treasury note, currently hovering around 4.5%, continues to offer a significant premium over German or Japanese government bonds. This yield differential provides a strong underlying bid for the dollar, making it risky to bet against it for extended periods. Traders should monitor these spreads closely, as any narrowing could signal a shift in momentum.
We should also remember the risks, like the government shutdown that was a concern back when the dollar was below 100. While that issue was resolved, we now face renewed debates around the US debt ceiling expected in the first quarter of 2026. Any signs of political gridlock could quickly undermine dollar strength, creating short-term selling opportunities.
