U.S. Dollar at 13-Month Highs as Short-Dated Yields Climb

The U.S. dollar index pushed to 13-month highs on Thursday, pressing against a multi-year resistance zone that has capped rallies since 2022, FOREX.com market analyst Razan Hilal said. The move came as short-dated Treasury yields rose, with the two-year yield climbing to its highest level in two weeks. Higher yields reinforce the case for the Federal Reserve to keep rates elevated for longer, a scenario that tends to draw capital into dollar-denominated assets.

Short-dated yields have been the primary driver of dollar strength over the past month. Markets have pared back expectations for a rate cut at the June meeting, with swaps now pricing roughly a 30% chance of a quarter-point reduction from 55% a week earlier. Hilal attributed the shift in rate expectations to resilient economic data and hawkish comments from Fed officials, which together have kept the policy path uncertain.

The DXY, which tracks the greenback against six major peers, was trading near 106.80. A sustained break above the 107-107.20 resistance band would target the 108 area, levels not seen since November 2022. Missing that breakout would put the index back into a range between 105 and 107, Hilal noted.