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Dollar climbs as yields peak and rate-hike odds rise
USDJPY hit 158.6 after US business activity strengthened, while futures now price 4.75% to 5.00% over the next year and the odds of two rate rises this year jumped to 58% from 40%.
The US dollar reached a six-week high and is trading near 17-month highs as US business activity strengthened to its highest level since 2021 and several Federal Reserve policymakers increased support for a rate rise. Action Forex said the move has been accompanied by Treasury yields climbing to 19-year highs, with 10-year yields pushing higher as the rate-hiking case strengthens.
The same report links additional momentum to a nearly 6.5% jump in oil prices after Iran said at the UN it would not open the Strait of Hormuz until all sanctions against the country are lifted. It added that a strengthening PMI points to faster-than-expected US GDP growth, supporting expectations that the economy can handle higher rates.
In markets, the report said futures have fully priced in a rise to 4.75%–5.00% over the next year, up from 3.75%–4.00% currently. The probability of two rate rises by the end of the year rose from 40% to 58%, and the likelihood of another rise in October increased from 54% to 70%.
Rising yields have also pushed USDJPY higher, with the pair reaching 158.6. Action Forex noted concerns about potential coordinated currency interventions by Japan and the US near prior levels, but said previous intervention efforts have not halted the USDJPY advance, while hedge funds have turned net buyers of the yen for the first time since July 2025.