United States Dollar Index rises to near 99.85 ahead of US ADP Employment data

The US Dollar (USD) experienced a surge in strength on Wednesday as bond yields rose due to increasing oil prices and predictions of a more assertive Federal Reserve (Fed). The US Dollar Index (DXY), which measures the value of the USD against six major currencies, increased by 0.2% and reached near 99.86. The 10-year US Treasury Yields hit a new high of 4.82%, which was the highest level since November 2023.

The US Dollar was the strongest against the New Zealand Dollar. Analysts noted that the ongoing Middle East tensions brought "inflation risks back into focus," leading to a rise in global bond yields. They also highlighted that this move was accompanied by a bearish flattening of the US yield curve, a stronger USD, and lower gold prices, as markets anticipated a 25 basis point Fed rate hike by October.

Fed Governor Michael Barr emphasized the hawkish policy outlook, stating that "further rate increases may be warranted if inflation fails to moderate." Traders awaited the US ADP Employment Change data for August, which would be released at 12:15 GMT. The private sector was expected to have created 48K new jobs, slightly higher than July's 44K.

The upcoming Nonfarm Payrolls (NFP) data for August would also be closely watched, scheduled for release on Friday.