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USD steadies after Middle East tensions lift yields and risk hedges

The dollar index slipped to a weakest level since early June below 99.50 before rebounding, while the 10-year Treasury yield rose to around 4.75%.

Reported · Written up by our desk · Major Pairs

Markets were cautious early Tuesday as tensions in the Middle East re-escalated, with traders balancing risk hedging against expectations for US rates. FXStreet said investors had scaled back bets for a Federal Reserve policy tightening in September after disappointing data, leaving the US dollar on a bearish start to the week.

FXStreet reported that the US Dollar Index dropped to its weakest level since early June, below 99.50, before rebounding later in the American session. In the European morning, it said the index was around 99.70, as the dollar stayed supported by relative yield expectations.

The report linked broader dollar support to higher Treasury yields and oil, citing heightened regional risk. FXStreet noted West Texas Intermediate was last near $84.70, up 0.7% on the day, and that the 10-year US Treasury yield was near 4.75%, its highest level since January 2025.

FXStreet also cited OCBC's view that a combination of still-attractive USD carry and a pause in the dollar's bullish momentum could keep the greenback rangebound in the near term, assuming long-end US yields do not rise much further. It added that additional US data later Tuesday included housing data, the Import Price Index, the Export Price Index, and Industrial Production for July.

Latest closeDollar index 99.64 ▼0.3%

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