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US Treasury yields underpin US dollar strength, strategists say

OCBC expects next week’s US labor report to be a key risk, with consensus looking for non-farm payrolls of 100,000 and an unemployment rate of 4.1%.

Reported · Written up by our desk · Major Pairs

OCBC strategists Sim Moh Siong and Christopher Wong said resilient US data, sticky inflation, and elevated energy prices are lifting US Treasury yields and supporting the US dollar.

They flagged the next week’s US labor market report as a key risk, citing a Bloomberg consensus call for non-farm payrolls to rise by 100,000 in September, down from 162,000 in August, and for the unemployment rate to stay at 4.1%.

The strategists noted that falling jobless claims during the month are increasing the risk of an upside payrolls surprise, which could reinforce expectations for further Fed tightening, keep yields elevated, and provide additional support for the USD.

OCBC also pointed to recent hawkish Fed commentary, including warnings from New York Fed President John Williams and Cleveland Fed President Loretta Mester about upside inflation risks, along with remarks from Philadelphia Fed President Patrick Harker about the possibility of modest further tightening if in

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