US dollar banknotes. [Getty Images]
US dollar banknotes. [Getty Images]

The dollar climbed to a 16-month high against the euro and the Swiss franc on Tuesday (local time) as the yield on the benchmark 10-year US Treasury note held above 5%.

The euro fell as low as $1.1312 during trading in the New York foreign exchange market that day, its weakest level since May last year, according to Reuters.

The euro has remained under pressure amid a global energy shock and rising political risks in Europe. The Swiss franc also slipped 0.17 percent to 0.834 francs per dollar, its lowest level in 16 months.

The dollar index (DXY), which measures the greenback against six major currencies, surged as much as 0.41 percent intraday to 101.61 — its highest since late June — before closing up 0.17 percent from Tuesday at 101.37. It was the index's third consecutive session of gains.

The dollar index extended its advance in Asian trading Wednesday, edging up to 101.42 as of 9:20 a.m. Korean Standard Time.

The benchmark 10-year US Treasury yield continued its elevated run above 5%.

The Bloomberg Dollar Spot Index (BBDXY) has risen 1.9 percent so far in September, on track for its largest monthly gain since June and its highest level in two months.

"Interest rate differentials are dominating currency markets and lifting the dollar against all major currencies," said Karl Schamotta, chief market strategist at Corpay.

Morgan Stanley recently walked back its earlier outlook that the dollar would weaken in the second half of this year. New York Federal Reserve President John Williams said that day it may be appropriate to raise the benchmark interest rate one more time by year-end, though the probability of a Fed rate hike at the October meeting fell to around 50 percent from 70 percent on Tuesday.

Markets are pricing in nearly 1 percentage point of additional Fed rate increases over the next 12 months.

Among G10 currencies in September, all have weakened against the dollar except the yen, which has held around the 157-yen-per-dollar level, supported by the prospect of Japanese authorities intervening in the market and expectations of further rate hikes by the Bank of Japan.


yckim6452@heraldcorp.com