In recent trading, the US dollar has surged to its strongest point in 10 months against a basket of rival currencies. The US Dollar Index, which tracks the dollar against six other currencies, has risen by 2.76% over the past four weeks and reached a level of 107.16 on Tuesday, a level not seen since November last year. This strength in the dollar can be attributed to the Federal Reserve's hawkish outlook on interest rates and the 10-year US Treasury yield, which is at a 16-year high of 4.752%.
Investors believe that the central bank will continue to keep monetary policy restrictive for a longer period, leading to upward pressure on the greenback. The euro, in particular, has been affected by this trend, hitting its weakest level since December at around $1.0476. Some analysts predict that the euro may soon reach parity with the dollar, meaning a one-to-one equivalent.
The decline in the euro has been driven by algorithmic sales and weakening risk appetite due to the rising US bond yields. Similarly, the pound has dropped to its lowest level since March, reaching 1.20565 against the dollar. The yen has also approached the key threshold of 150 per dollar. Other currencies, such as the Australian dollar and Russia's ruble, have also weakened significantly.
Overall, the strength of the US dollar and the weakness of other major currencies can be attributed to the Federal Reserve's hawkish stance on interest rates and the strong performance of the US economy. This has led investors to believe that the central bank will maintain its restrictive monetary policy for a longer period, which has put upward pressure on the greenback. The euro, pound, yen, Australian dollar, and ruble have all suffered as a result, reaching multi-month lows against the dollar.