Dollar Index edges toward 102.00 ahead of packed central bank week
The US Dollar Index rose 0.24% to around 101.98 on Monday as investors positioned for rate decisions from five G10 central banks, including a Fed meeting on Wednesday widely expected to hold rates.
Support also came from US Treasury yields, which steadied after last week’s slide. The 10-year Treasury yield held near 4.98%, with shorter maturities ticking up and longer-dated yields little changed close to recent lows. Bond prices had rallied last week amid worries about AI-related investment spending, pulling yields down across the curve.
This week brings decisions from the Reserve Bank of New Zealand (RBNZ), the Bank of Canada (BoC) and the Fed on Wednesday, followed by the European Central Bank (ECB) on Thursday and the Bank of Japan (BoJ) on Friday. Analysts at MUFG/BTMU expect the RBNZ and BoC to raise rates by 25 basis points each, while the Fed, ECB and BoJ hold steady.
The Fed last raised its benchmark rate by 25 basis points in September, bringing it to a range of 3.75%-4.00%. Its dot plot pointed to a median rate of 4.1% for both end-2026 and end-2027, implying one more quarter-point move this year. The CME FedWatch Tool shows markets pricing roughly a 79% probability of a December hike.
MUFG/BTMU noted that tightening financial conditions and bond-market volatility in Europe could keep the dollar underpinned, with risks tilted to the upside. They also flagged that the Fed’s final 2025 meeting isn’t until December 9, leaving room for rate-hike expectations to shift depending on how conditions evolve.
Markets will watch Fed Chair Kevin Warsh’s press conference for signals on whether the central bank stays on the path implied by its dot plot. Thursday’s US Personal Consumption Expenditures (PCE) inflation data and the advance third-quarter GDP estimate will offer further input for December rate expectations.
Why it matters: A heavy week of central bank decisions, especially the Fed’s guidance on a possible December hike, will shape expectations for US interest rates and the dollar. Moves in Treasury yields and the Dollar Index also ripple into EUR/USD, gold, and broader risk sentiment across equities.
Source: FXStreet