Dollar near two-week high as oil surge lifts yields, Fed hike bets - Reuters

FOREX Dollar ticks higher as oil prices climb, Fed rate hike chances firm | Reuters

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FOREX Dollar ticks higher as oil prices climb, Fed rate hike chances firm

By

Shashwat Chauhanand

Jiaxing Li

September 14, 2026

8:58 PM CDT

Updated 2 hours ago

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!The 10-year yield just hit 5% - what does it mean for investors?

* Summary

* Treasury 10-year yield climbs to highest since 2007
* Fed hike on Wednesday seen as done deal
* Dollar strength pushes kiwi to two-month low
* Yen falls to 155 for first time in a week

Sept 15 (Reuters) - The euro was pinned at one-month lows against a broadly strengthening dollar on Tuesday, as surging oil ‌prices lifted Treasury yields and reinforced expectations that the Federal Reserve will hike interest rates this week.

Benchmark U.S. 10-year Treasury yields surged to their highest since 2007, climbing 7.2 basis points on the day to 5.03%.

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Oil prices held near a four-month peak, standing at $107.7 a barrel, after Yemen's Iran-aligned Houthis launched ​a new wave of attacks on Saudi Arabia and Gulf-Iran talks were postponed.

Markets now see a Fed hike on Wednesday ​as a near certainty, with CME's FedWatch tool pricing in a more than 94% chance of an ⁠interest-rate increase.

"It's quite likely they will hike at this point. What's happening in the bond market is a warning signal, and ​if they decide to hold rates at this stage, it can lead to unwanted turmoil," said Francesco Pesole, FX strategist at ING.

"From ​an FX perspective, we see it as a positive event for the dollar."

Pressured by broad dollar strength, the euro slipped 0.1% to $1.153, hovering near its lowest since August 14.

Sterling weakened 0.1% to $1.34 ahead of a Bank of England interest rate decision on Thursday where consensus is widely tilted towards a ​hold, though future rate hikes are expected by year-end, according to data compiled by LSEG.

Data on Tuesday showed Britain's jobs market stayed weak, ​with vacancies at a four-year low and pay growth steady.

An employee holds U.S. dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. REUTERS/Willy Kurniawan Purchase LicensingRights , opens new tab

The yen also pulled away from a seven-month high, leaving the dollar up roughly 0.4% ‌at 154.94 ⁠ahead of an expected Bank of Japan rate hike on Friday. It briefly weakened past 155 for the first time in a week earlier on.

Market sentiment on the yen is starting to shift, with speculators turning to a net long position on the Japanese currency for the first time since February .

The New Zealand dollar dipped 0.1%, briefly hitting a two-month low, while the Australian dollar ​was 0.2% lower at $0.712.

The dollar's six-currency ​index rose 0.1% to 99.61, ⁠standing near its highest in about two weeks, also gaining support from weakened risk appetite as stock markets fell.

RATE HIKES AWAITED

The renewed energy-induced inflation pressures follow a U.S. jobs report that was much ​stronger than expected and a pickup in consumer prices for August, strengthening market conviction that the Fed ​will raise rates ⁠on Wednesday.

Economists polled by Reuters also expect at least one more hike by the end of March, reversing a fragile no-change consensus prior to Friday's official data showing firm inflation.

"On Wednesday, investors will look to Kevin Warsh and the dot plot to tease out if this is ⁠a hike, ​or a hiking cycle," said Paul Eitelman, global chief investment strategist at Russell ​Investments.

The offshore yuan was flat at 6.714 per dollar, hovering near its strongest in more than three years, after data showing China's industrial sector regained strength in August, ​though consumption remained sluggish.

Reporting by Jiaxing Li in Hong Kong and Shashwat Chauhan in Bengaluru; Editing by Amanda Cooper and Jan Harvey

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