DXY Outlook: Dollar Climbs Despite Lower Rate Bets, Boosted by Global Currency Weakness

DXY Swings Sharply; Traders Focus on 98.714 Support After Post-Minutes Breakout

The U.S. Dollar Index (DXY) saw sharp intraday swings on Wednesday, spiking to a new session high of 99.060 after the release of the Federal Reserve’s September minutes, which reinforced expectations for more rate cuts this year.

Earlier in the day, the index had surged to 98.989 before correcting into 98.714. The post-minutes rebound caught shorts off guard, lifting the dollar broadly and triggering renewed bullish interest heading into the U.S. close.

At 19:03 GMT, DXY is trading 98.882, up 0.307 or +0.31%.

Fed Minutes Confirm Dovish Lean But Reveal Internal Division

The Fed’s minutes revealed a committee leaning dovish but not fully unified. While roughly half of officials see room for two more cuts by year-end, others left the door open for three. Last month’s 25 basis point cut—the Fed’s first of the year—was approved 11-1, with members citing cooling employment data and inflation stabilization as justification.

Markets interpreted the tone as supportive of further easing. CME FedWatch now shows a 96% probability of another 25 bp cut at the October 28–29 meeting and 79% odds of an additional move in December. With the government shutdown delaying key economic releases, including the jobs report and CPI, Fed speakers—especially Chair Powell on Thursday—have taken on added significance.

Treasury Yields Hold Firm Despite Auction Concerns and Shutdown Uncertainty

U.S. Treasury yields remained firm, reinforcing dollar support. The 10-year yield rose slightly to 4.135%, while the 2-year climbed to 3.593%. The 30-year was flat at 4.728%. The Treasury’s 10-year auction stopped at 4.117% and was described as “mixed” by BMO, offering little to change the market’s broader expectations.

Shutdown-related data blackouts are leaving traders reliant on Fed communications and technical signals, which are now driving much of the dollar’s direction in the short term.

Yen Weakens as Japan Policy Risk Grows; Euro Pressured by France Unrest

The yen extended losses, with USD/JPY hitting 153.003—its weakest level since mid-February—as investors priced in fiscal stimulus under Japan’s likely new PM, Sanae Takaichi. Her expected Abenomics-style policies triggered a wave of yen selling. Political instability in France also pushed the euro to $1.1605, its lowest since August 27.

Market Forecast: Dollar Bulls Eye Retest of 99.060—But 98.714 Is the Pivot

After the sharp reversal and post-minutes spike, the DXY is trading just under session highs. Immediate support sits at 98.714. A break below exposes 98.238 and the 50-day moving average at 98.010. But as long as 98.714 holds, traders will be watching for another retest of 99.060, with 100.000 increasingly within reach if Fed officials echo the minutes’ easing bias.

More Information in our Economic Calendar.