US Dollar stays fundamentally supported – Scotiabank

FXStreet Insights Team FXStreet

Scotiabank’s Global FX Strategy team, led by Shaun Osborne and Eric Theoret, notes broad Dollar strength versus most G10 currencies, with focus on Oil, US yields and the Federal Reserve rate path. The team stresses that DXY gains since early September are fundamentally driven by 2-year yield spreads.

Broad G10 defensive tone versus Dollar

"The broader tone is somewhat defensive, leaning toward mild risk aversion as US equity futures show modest losses while US bond yields remain well supported with the 10Y hitting a fresh marginal high—extending above 5.2% to reach its highest level since 2007."

"The shape of the curve is also starting to garner some attention, given the renewed flattening and its implications for the broader USD."

"For the DXY, we continue to highlight that the gains from early September have been fundamentally driven, with spot largely moving in tandem with our fair value estimate based on 2Y spreads—currently at 100.5 (vs. spot just above 101)."

"The recent gains have pushed the DXY toward the June 24 high that marked the local peak and 2026 YTD high."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hits nine-week lows below 0.7000 on RBA Bullock's remarks

AUD/USD reverses a brief uptick and turns lower to hit nine-week lows below 0.7000 in the European morning on Tuesday, as traders digest cautious remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock during the press conference. Earlier on, the RBA raised the cash rate to 4.60%, as widely expected, leaving the door open to further rate hikes if needed.

USD/JPY consolidates near 157.50 as a bullish USD counters intervention risks

USD/JPY struggles to capitalize on the overnight bounce from a one-week low, consolidating around 157.50 in the Asian session on Tuesday. Trump's concerns about the Japanese Yen's weakness fueled speculation about another US-Japan joint intervention. This, along with the hawkish BoJ, underpins the JPY and caps the currency pair. Meanwhile, rising Fed rate-hike bets and oil-driven inflation fears continue to push US bond yields to multi-year highs, keeping the US Dollar pinned near a two-month high and supporting the pair.

Gold: Bulls seem hesitant as Fed hike bets, higher bond yields, and bullish USD cap upside

Gold clings to modest recovery gains through the first half of the European session, albeit it lacks follow-through and remains below $4,150. Moreover, the bearish fundamental backdrop keeps the precious metal within striking distance of the lowest level since August 4, around the $4,100 neighborhood touched on Monday, and warrants caution before positioning for any meaningful appreciation.

Chainlink trims gains after CCIP 2.0 launch, Swift ledger integration

Chainlink (LINK) edges below $15.00 on Tuesday, trimming its 10% gains from the previous day, driven by the launch of its new Cross-Chain Interoperability Protocol 2.0 and Swift ledger integration for tokenized deposits and 24/7 cross-border payments.

Focus turns to US job openings

In the euro area, focus turns to the September flash inflation print for Spain which will give the first indication of where the euro area data on Friday lands. We expect a modest rise in headline due to higher energy costs and a small increase in core inflation. We also receive the European Commission's business survey for September.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.