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Dollar to End Month Near One-Year Highs as Yields Flourish in September By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The dollar is set to end the month sharply higher Thursday, riding a wave of positive headwinds including expectations for Treasury yields to continue their advance into year-end as the Federal Reserve prepares to tighten monetary policy.

The greenback was measured against six trade-weighted currencies. It rose by 0.5% to 94.33. This is its highest point since November 2013.

“Keep an eye on the USD index … the base this currency is building has been very impressive, and it implies we could continue to see dollar strength in the coming months,” Janney Montgomery Scott said.

A sharp rise in Treasury yields has supported the greenback, despite an increase in real rate.

“US interest rates have moved sharply higher during the past two weeks, driven almost entirely by real rates,” Goldman Sachs (NYSE:) said in a note.

Since September 15, the real has increased by 20 basis points to 0.85%.

As inflation increases, the trend towards higher rates will continue. The Federal Reserve plans to tighten its monetary policy.

“Given the low-yielder prevalence of Europe and the Yen in (dollar index) DXY weightings, expect the short-end story to keep DXY bid,” ING said in a recent note.

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