The US dollar strengthened to kick off the trading week as investors continue to bet that the Federal Reserve will do more than just one-and-done on interest rates.
The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, rose 0.2% to 100.43, from an opening of 100.25, at 19:31 GMT on Monday. The index is coming off a weekly gain of almost 1% and is up 2.1% year-to-date.
Last week, the buck surged after the Federal Reserve raised interest rates for the first time since July 2023, bringing the benchmark federal funds rate to a new target range of 3.75% to 4%.
While the Summary of Economic Projections indicated at least one more rate hike, traders have been split on whether the US central bank would follow through on another quarter-point increase.
In a first of many public remarks among Fed officials this week, Chicago Fed President Austan Goolsbee warned that the current monetary policy path might be “painful.”
Speaking overseas, Goolsbee urged his colleagues not to look through oil supply shocks caused by the war in Iran, now approaching its seventh month.
“The only way to bring inflation down is to raise rates and narrow the gap between supply and demand. Forcing inflation back to target in the short run means pushing employment below target,” Goolsbee said in prepared remarks.
“In the short run, supply shocks force a difficult trade-off” between the Fed’s goals of low inflation and maximum employment.
Goolsbee told reporters after his speech that “it’s going to be painful.”
US crude oil futures plummeted $4.39, or 4.38%, to $95.91 per barrel on the New York Mercantile Exchange after President Donald Trump said that he is open to talking to Iran during this week’s United Nations General Assembly.
Yields on US Treasury securities were mixed, with the benchmark ten-year erasing about four basis points to below 4.96%. The 30-year yield dipped below 5.3%. The two-year yield, which generally tracks monetary policy expectations, was little changed at 4.75%.
The USD/CAD currency pair rose 0.35% to 1.4035, from an opening of 1.3994. The EUR/USD fell 0.14% to 1.147, from an opening 1.1487.