The US dollar is ending the week near its strongest level in several months. A hotter-than-expected US inflation report on Tuesday 10 November and hawkish comments from Federal Reserve officials have led markets to price a Fed rate hike at the meeting on 9 December, and the US 10-year Treasury yield is back above 5%. The dollar index stands at 103.23 on our MT5 feed, +0.99% over five days. The US producer price index for October was due at 16:30 Mecca time today, and several Fed officials speak this evening.
What happened
The dollar has risen this month for one main reason: markets now expect the Federal Reserve to raise interest rates again, not cut them. These are the key steps:
A stronger-than-expected US jobs report for October lifts bets on a December rate hike. That day, futures put the chance of a quarter-point hike at about 77%.
October consumer prices come in hotter than expected. Fed Governor Christopher Waller signals that more tightening may be needed. The 10-year Treasury yield touches 5% during the day.
The US bond market is closed for the Veterans Day holiday.
When bonds reopen, the 10-year yield jumps more than 13 basis points and closes above 5%, and oil prices also rise. Gold falls sharply. Late in the day, New York Fed President John Williams says inflation is still too high and that action is needed.
The 10-year yield rises another 2 basis points to about 5.13% and the 30-year yield to about 5.46%, while the 2-year yield slips to about 4.85%. Rate futures now fully price a Fed hike on 9 December. Most bets are on a quarter point, and a smaller share on half a point. USD/JPY reaches a 5-day high of 160.18 in Asian hours, then pulls back.
Why higher US yields lift the dollar
When US rates are expected to rise, holding dollars and US bonds pays more. Money moves into the dollar from lower-yielding currencies and from assets that pay no interest, such as gold. A 10-year yield above 5% is the highest return on US government debt that many investors have seen in years, and it pulls money towards the United States.
Rising yields also hurt riskier assets. Bitcoin fell −4.23% over the past 24 hours on our feed, and gold moved −0.13% after its sharp fall on Thursday.
The dollar on our feed
The dollar index (USD-Index) measures the dollar against six major currencies. It is at 103.23: +0.29% on the day and +0.99% over five days, with a 5-day range of 101.49 to 103.32.
The dollar index, EUR/USD, USD/JPY and gold side by side over the same five days:
What it means for our readers' currencies
- Gulf: most Gulf currencies, including the Saudi riyal and the UAE dirham, are pegged to the dollar, and Gulf central banks usually follow Fed rate moves. A Fed hike in December would most likely mean higher borrowing costs in the Gulf too.
- Japan: USD/JPY is at 159.91, +1.04% over five days. Japan sold dollars to support the yen in 2022 and 2024, so traders watch for official action when the yen weakens fast.
- Euro: EUR/USD is at 1.1052, −0.35% on the day.
- Turkey: the Central Bank of the Republic of Turkey's November survey of market participants showed the expected dollar rate above 60 lira and an inflation expectation above 30%. USD/TRY is at 50.29 on our feed.
- Mexico: USD/MXN moved −0.42% on the day to 18.55.
- Brazil: the dollar traded around 5.64 reais on Friday morning. On Thursday night the Senate had approved the main text of the government's 2027 fiscal package.
- Other importers: in countries that pay for imports in dollars, such as Egypt and Nigeria, a stronger dollar and higher US rates usually put more pressure on local currencies and raise the cost of dollar debt.
Scenarios
- Inflation stays hot: if producer prices and the Fed speakers this evening confirm sticky inflation, markets may add to bets on a half-point hike. The dollar and yields could then stay firm while gold stays under pressure.
- Inflation cools: if price data slow more than expected and short-term yields fall, part of this week's dollar buying may unwind before the weekend.
- Yen intervention: if Japan steps in to support the yen, USD/JPY could fall sharply in minutes, and the dollar index could dip with it.
What to watch next
- Reaction to US producer prices for October, released at 16:30 Mecca time today. Forecasts were a 0.4% monthly rise after 1.3% in September, and 6.6% over a year after 6.3%. Core producer prices were forecast to rise 0.3% on the month after 0.7%.
- Today, 17:10 Mecca time: Boston Fed President Susan Collins speaks; 18:50 Mecca time: Fed Board member Michelle Bowman speaks.
- Friday close: traders close or adjust positions before the weekend, which can make late-day moves sharper.
- The 5% line on the US 10-year yield: if the yield holds above it, the dollar may stay supported.
- Wednesday 9 December: the Fed's rate decision.
Trading the dollar at TNFX
The dollar index (USD-Index), EUR/USD, USD/JPY, USD/TRY, USD/MXN and gold (XAUUSD) are available as CFDs on MT4 and MT5, long or short. Around data releases and central bank speeches spreads can widen and prices can jump, so use stop-losses and size positions for the risk.
Follow the dollar on MT5
Open a real account in two minutes, or practise first on a free demo account with virtual money.
Common questions
Why is the US dollar rising?
Hotter-than-expected US inflation data on 10 November and hawkish comments from Fed officials have led markets to expect a Fed rate hike in December. That pushed the 10-year Treasury yield above 5% and drew money into the dollar.
Will the Fed raise interest rates in December?
Markets expect it to. Rate futures fully price a hike at the Fed meeting on 9 December, mostly a quarter point. The Fed makes the decision, and it is not certain.
What is the dollar index today?
On the TNFX MT5 feed the dollar index is at 103.23, +0.99% over five days.
Why is gold falling when the dollar rises?
Gold pays no interest. When US yields rise above 5% and the dollar strengthens, holding gold becomes less attractive and more expensive for buyers in other currencies.
Does a strong dollar affect Gulf currencies?
Most Gulf currencies, such as the Saudi riyal and the UAE dirham, are pegged to the dollar, so their exchange rates do not move much. But Gulf central banks usually follow Fed rate decisions, so local borrowing costs can rise.
Will Japan intervene to support the yen?
No one knows in advance. Japan sold dollars to support the yen in 2022 and 2024. USD/JPY reached 160.18 this week on our feed, and at this level traders are alert to official action.
When is the next Fed decision?
The Federal Reserve announces its next rate decision on Wednesday 9 December 2026.