US Dollar Forecast: Index Rises Toward 100.257 on Hawkish Fed Comments

DXY Tests August High as Traders Scale Back Rate Cut Bets

The US Dollar Index (DXY) advanced for a third straight session on Friday, reaching 99.844 during mid-day trade and approaching the August 1 high at 100.257. The rally has been driven by reduced expectations of another Federal Reserve rate cut this year following cautious comments from policymakers.

At 11:20 GMT, DXY is trading 99.804, up 0.282 or +0.28%.

The Fed lowered its benchmark rate by 25 basis points on Wednesday to a range of 3.75%–4.00%, its lowest in three years. Chair Jerome Powell told reporters afterward that another cut in December was “far from” certain, adding that the ongoing US government shutdown is limiting access to key economic data needed for policy assessment.

Fed Officials Signal Division Over Further Easing

Two Federal Reserve officials dissented from this week’s decision, highlighting a growing policy divide within the central bank. Kansas City Fed President Jeffrey Schmid and Dallas Fed President Lorie Logan both opposed the reduction, citing ongoing inflation pressures and resilient financial conditions.

Schmid pointed to strong equity markets, narrow corporate bond spreads, and robust credit issuance as evidence that financial conditions remain loose. Logan added that future rate cuts would require “clear evidence” of faster disinflation or a more significant labor market slowdown.

Market pricing has shifted sharply in response. According to CME FedWatch, the probability of another cut in December has fallen to 63%, down from 92% a week ago.

Treasury Yields Hold Firm After Fed Decision

The 10-year Treasury yield steadied near 4.089% on Friday after briefly touching 4.10% earlier in the session. The 2-year yield slipped to 3.594%, while the 30-year held around 4.659%. The yield recovery from earlier lows below 4.00% underscores investor skepticism that the Fed will continue easing without new data showing weaker growth or inflation.

Global Currencies Under Pressure as Dollar Strength Builds

Across global markets, the dollar outperformed major counterparts. The yen traded at 154.125 per dollar and remains down 4% for October—its worst monthly performance since July—despite Tokyo core inflation rising 2.8% year-on-year. The Bank of Japan’s decision to leave rates unchanged has done little to support the currency.

Sterling weakened 0.2% to $1.312 and is on track for a 2.3% monthly loss as investors await Finance Minister Rachel Reeves’ upcoming budget. The euro held flat at $1.1562 after the European Central Bank kept rates at 2% for a third meeting, reinforcing the yield advantage of the US dollar.

Market Forecast: Dollar Bias Remains Bullish Into November

The combination of hawkish Fed commentary, firm Treasury yields, and rate divergence with other major economies continues to underpin the dollar’s strength. A sustained move above 100.257 would likely attract further momentum buying.

With limited US data during the government shutdown and reduced expectations for additional easing, the dollar bias remains bullish through November.

More Information in our Economic Calendar.