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US Dollar Index: DXY Rises to New Highs Amid Record-High Yields

Simon Mugo trader
Updated 27 Sep 2023

The US Dollar Index today hit new 10-month highs above 106.48. It was headed higher, printing new year-to-date highs as the US dollar strengthened against its peers boosted by the country’s robust economy, increasing its appeal as a safe-haven asset. 


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


The dollar’s strength has been underpinned by the hawkish Fed rhetoric, which has signalled that the Federal Reserve could keep rates higher for much longer than was initially expected. Many thought the Fed had reached the end of its rate hiking cycle, but this may not be the case if US inflation remains high.

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The rally in the US dollar has also been fueled by the surge in US bond yields, with the benchmark 10-year bond yield rising to a 16-year high of 4.548% on Tuesday with the 30-year bond yield rising by 2.4 basis points to a high of 4.6834%, from 4.659%, and the 2-year note yielding 5.1336% being the highest yield of the three bonds. 

The selloff in US bonds supported the record-high bond yields witnessed recently amid a looming government shutdown as the Republicans and Democrats fight for different ideas. The Republicans want the government spending to be lowered with aid to Ukraine being slashed, while the Democrats are fighting for higher spending limits. 

The lack of a solution to the government funding crisis has also hit US equities as inventors brace for a US government shutdown, which could be prolonged until the two parties reach some form of consensus.  

The equities markets have also suffered in the process, as they have fallen on the government uncertainty and the strong US dollar, which tends to have an inverse relationship with the equities market. However, the bond yields have pulled back from yesterday’s record highs. 

Managing director of equity trading at Wedbush Securities in Los Angeles, Michael James, said:  “The concerns about continued higher rates have been weighing on stocks for about two months since the peak at the end of July. The downward price action becomes self-fulfilling. When those that are hoping for a bounce don't get one, they become frustrated.”

The US Dollar Index price chart. 

The US Dollar Index (DXY) was trading up 40.3 (0.38%) at a high of 106.58 and was headed higher.


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading