The dollar touched a more than three-month high on Thursday, supported by an extended rise in US Treasury yields that has been partly driven by concerns about persistent global price pressures stemming from the US-Israeli war on Iran.
Data showing US inflation rose less than expected in August, along with downward revisions to July’s reading, reduced expectations for a Federal Reserve rate hike this month. But a surge in euro zone inflation underscored the threat that higher energy prices continue to pose to the global economy.
Against the dollar, the euro fell 0.11% to US$1.1317 in Asia. It clocked a loss of nearly 2.5% in September, the largest since July 2025, pressured by Europe’s debt and energy worries.
Sterling edged 0.1% lower to US$1.32495 after having slid 2.1% last month, similarly weighed down by a stronger greenback. The dollar peaked at 101.66 against a basket of currencies, its highest level since June 25, extending its 2% rise in September.
“The US dollar seems to be showing more sensitivity, just at the moment, to what’s happening with say, 10-year Treasuries, than it is on pricing for when the next Fed rate hike might come,” said Ray Attrill, head of FX strategy at National Australia Bank.
“While yields are continuing to rise for the time being, I think it’s supportive for the dollar. If we do get an inflection point where it starts to really hurt the equity market, the dollar can benefit from that.”
Global bonds suffered their largest monthly decline in years in September, pushing yields higher, due to a toxic mix of deteriorating government finances, a glut of issuances and rising inflation.
The scaling back of expectations for a Fed hike this month prompted a slight retreat in shorter-dated US Treasury yields, but 10- and 30-year yields still hit new highs in the previous session. They hovered near those levels on Thursday.
Against the yen, the dollar was up 0.54% at 158.29 after falling 1.4% against the Japanese currency last month.
“The yen has been the strongest of the G10 currencies (in September), and the market’s reluctance to be caught out by intervention is clearly having an impact,” said Kit Juckes, chief FX strategist at Societe Generale.
Some Bank of Japan policymakers saw the need to accelerate the pace of interest rate hikes or bring them closer to the central bank’s “goal” soon, a summary of opinions at its September meeting showed on Thursday.
The Australian dollar fell to a two-month low of US$0.6940 on Thursday, as investors lengthened the odds on another near-term rate hike from the Reserve Bank of Australia after domestic inflation came in slightly lower than forecast.
The New Zealand dollar similarly slid to its lowest point since November 2025 at US$0.5618.
