US Dollar Index climbs back near its 18-month high as yields rise

The US Dollar Index has climbed back toward its 18-month peak as bond yields rise, according to recent market reports. The 10-year Treasury note's yield hit 5.35%, the highest since April 2002, while the 30-year bond reached a 24-year high. The surge in oil prices, driven by Iran's increased attacks on tankers in the Strait of Hormuz, has led to higher inflation expectations, prompting bond buyers to demand greater yields.

This shift in investor sentiment has seen Treasuries sold off prior to the $39 billion issuance of new 10-year notes. On Thursday, the Treasury Department will issue new 30-year bonds while simultaneously repurchasing existing ones. In Europe, investors opted for safer German debt, resulting in a near 3.5% yield on the German 10-year bond, leaving the US 10-year with an advantage of over 1.8 percentage points.

The Euro, accounting for around three-quarters of the US Dollar Index's strength, contributed significantly to the index's recent climb, which has recovered from a low of 98.60 on September 9. Wednesday's recovery has retraced Tuesday's drop to around 101.75, touching 102.50 twice, a level where Monday's rally hit its highest since April 2025.

Currently, the index is trading near 102.35 after a slight dip. The 50-day Exponential Moving Average (EMA) is at 100.50 and climbing. The US Dollar is the world's most traded currency, responsible for over 88% of global foreign exchange turnover. The Fed, responsible for monetary policy, influences the US Dollar's value through interest rate adjustments.

When inflation accelerates and inflation exceeds the Fed's 2% target, the Fed raises rates, strengthening the USD. Conversely, when inflation falls below 2% or unemployment rates are too high, the Fed may lower interest rates, weakening the Greenback. In extreme cases, the Fed can print more Dollars and engage in quantitative easing (QE), which involves the Federal Reserve injecting more Dollars into the economy to stimulate credit.

However, QE typically results in a weaker US Dollar. Recently, gold has rebounded, surpassing $4,100 per troy ounce, while Bitcoin and most altcoins have been in a correction trend.