Dollar holds near monthly highs

The US dollar held near a two-month peak on Thursday, supported by the continuous rise in US Treasury yields and lingering concerns over global price pressures stemming from the conflict in the Middle East. Data showed that US inflation rose less than expected in August, alongside a downward revision for July figures, which tempered expectations for an interest rate hike this month. However, the sharp increase in eurozone inflation highlights the ongoing threat posed by rising energy costs to the global economy. The euro dipped slightly to 1.1330 dollars at the start of the Asian session, registering a monthly loss of nearly 2.5 percent in September, its steepest since July 2025, under the weight of European debt and energy concerns. The British pound settled at 1.3264 dollars after dropping 2.1 percent the previous month, also pressured by the strength of the dollar. The dollar index hovered near a two-month high against a basket of currencies, trading most recently at 101.48 after surging two percent in September. Global bonds suffered their largest monthly drop in years during September, driving yields higher due to a combination of deteriorating government finances, heavy issuance, and rising inflation. Easing expectations regarding a US rate hike this month caused a slight dip in short-term Treasury yields, but yields on 10-year and 30-year bonds reached new highs overnight. The yen fell 0.2 percent to 157.82 per dollar, despite posting gains of nearly 1.5 percent last month. Kit Juckes, chief foreign exchange strategist at Societe Generale, noted that the yen was the strongest G10 currency in September, stating that the market's avoidance of intervention traps is clearly having an effect. A summary of opinions from the Bank of Japan's September meeting, released on Thursday, showed that some policymakers at the central bank saw a need to accelerate the pace of interest rate hikes or bring them closer to the central bank's target as soon as possible. The Australian dollar dropped to a two-month low of 0.6940 dollars as investor speculation solidified that the Reserve Bank of Australia will not raise interest rates in the near term after domestic inflation came in slightly below forecasts. The New Zealand dollar retreated to approach its lowest level since November 2025, stabilizing at 0.5636 dollars.