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Dollar rally loses monetary-policy support, DBS says

DBS notes expectations for a back-to-back rate hike at the October 28 FOMC meeting have been pushed back by senior Fed officials.

Reported · Written up by our desk · Major Pairs

DBS Group Research economist Philip Wee said the US dollar’s three-week rally is losing monetary-policy support, with senior Federal Reserve officials pushing back against expectations for another rate hike at the October 28 FOMC meeting, according to FXStreet.

Wee argued the driver behind rising long-dated Treasury yields is becoming increasingly important for the USD, suggesting higher term premia tied to debt supply, fiscal sustainability, and market credibility may offer less support than Fed-driven tightening.

The economist also pointed to other potential constraints on the dollar outlook, including the November 3 US midterm elections.

FXStreet reports that Wee said the market’s focus could shift back toward why long-dated Treasury yields are nearing pre-global financial crisis highs, and he distinguished between yields supported by Fed tightening versus those driven by term premia.

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