The US dollar continues to remain strong against major currencies, reaching 10-month highs, thanks to rising US bond yields. Resilient economic data, hawkish Federal Reserve rhetoric, and a budget deficit to be financed by borrowing have pushed the 10-year Treasury yield above 4.5% for the first time since 2007. The increase in US yields has caused the euro to lose 0.5% and sterling to fall to a six-month low. Meanwhile, the yen has been steadily declining and is inching closer to the intervention danger zone.

Some central banks are signaling the end of their hiking cycles, with the Swiss franc and the yen experiencing significant movements. The Swiss franc has fallen to its lowest level since June, while the yen is approaching the critical level of 150 per dollar. The finance ministry, concerned about the yen’s depreciation, has warned of possible intervention. Rising commodity prices have offered support to antipodean currencies, such as the Australian and New Zealand dollars, but they have mostly traded sideways. The Chinese yuan is also facing pressure due to fears about the country’s struggling property market.

Despite the possibility of a slowdown in the US economy, the dollar is expected to find support from safe-haven demand and concerns about global growth. Analysts believe that the dollar is unlikely to significantly weaken until there are clear indications of future rate cuts by the Federal Reserve. Some expect the euro to dollar exchange rate to drop further from its current levels around $1.06.

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