Dollar Surges as U.S. and Canadian Central Banks Chart Divergent Paths

The dollar rose beyond 153 yen for the first time in three months amid diverging interest rate strategies among major central banks. The dollar's strength is fueled by robust U.S. economic data and rising Treasury yields, with market focus also on the upcoming U.S. presidential election.

The U.S. dollar has vaulted beyond 153 yen, a milestone reached for the first time in nearly three months, as global central banks set diverging courses on interest rates. The greenback is basking in its 16th gain over an 18-session period, bolstered by flourishing U.S. economic data that has tempered expectations for substantial Federal Reserve rate cuts, thereby driving U.S. Treasury yields upwards.

The benchmark U.S. 10-year Treasury note yield edged up by 4.2 basis points to hit 4.248%, flirting with a three-month peak of 4.26%. As yields ascend, investors are bracing for the U.S. presidential election, slated for November 5. This shift from an initial focus on economic recovery to potential political influence marks a new phase, according to George Vessey of Convera in London. He suggests that the dollar's short-term bullish bias may now hinge on potential Trump-era hedges rather than rate expectations.

The dollar index, which juxtaposes the greenback against other currencies, advanced to 104.49, nearing a peak since late July. Meanwhile, the euro and sterling slipped as central bank strategies dominate market movements. The Fed's forthcoming 'Beige Book' could provide further rate cues, while the Bank of Canada's hefty rate cut contrasts with the ECB's cautious approach amid suspect eurozone prospects.

(With inputs from agencies.)