Key facts
- The dollar reached a fresh two-month high on Thursday.
- Treasury yields climbed, with the 30-year yield at its highest since June 2004 and the 10-year yield at its highest in nearly two decades.
- Weekly initial jobless claims fell to 197,000, below economists' estimates.
- Oil prices surged nearly 4% on supply disruption fears.
- Several Federal Reserve officials indicated the possibility of further rate increases.
- Expectations for a Fed rate hike in October rose to 68.6%.
The dollar reached a fresh two-month high on Thursday, driven by rising Treasury yields and strengthened expectations of further Federal Reserve interest rate hikes following hawkish remarks from central bank officials and solid economic data. The dollar index, which measures the greenback against a basket of currencies, was on track for a fourth straight daily advance as it rose 0.15% to 101.28 after hitting 101.39, its highest since July 29.
Treasury yields continued to climb after sharp moves in the prior session, with the 30-year US bond yield at its highest since June 2004 and the benchmark 10-year note at its highest in nearly two decades. Data on Thursday showed weekly initial jobless claims dipped by 1,000 to 197,000, below the 201,000 estimate of economists polled by Reuters, indicating a steadying labor market.
Adding to inflation concerns, oil prices were up almost 4% in choppy trading after a Houthi missile attack on Saudi Arabia revived supply disruption fears, although gains eased on reports the US and Iran discussed reopening the Strait of Hormuz. Since the central bank's rate hike of 25 basis points last week to the 3.75%-4.00% range, several Federal Reserve officials have flagged the possibility of more rate increases if inflation does not moderate.
Comments from several Fed officials on Thursday reinforced the need to combat inflation, with New York Federal Reserve President John Williams and Philadelphia Fed President Anna Paulson noting that more rate increases were likely needed. Expectations for a rate hike of at least 25 basis points at the Fed's October meeting stood at 68.6%, up from 55.4% a week ago, according to CME FedWatch.
The euro was off 0.07% at $1.1372 after falling to $1.1358, its lowest since July 28. European Central Bank board member Isabel Schnabel resigned on Thursday to take on a senior role at the International Monetary Fund.
Norway's central bank raised interest rates on Thursday and Sweden's signaled it was likely to follow suit before the end of the year. Against the Norwegian crown, the dollar strengthened 0.33% to 9.51 while the Swedish crown weakened 0.1% versus the dollar to 9.921.
Against the Swiss franc, the dollar strengthened 0.34% to 0.828 after climbing to 0.8296, its highest since May 2025. The Swiss National Bank stood apart from other central banks by keeping its benchmark interest rate on hold.
The Japanese yen weakened 0.32% against the greenback to 158.82 per dollar after Japanese Finance Minister Satsuki Katayama said the principles underpinning the coordinated Japan-US currency intervention in July remain intact.