Dollar hits 16-month high on euro and Swiss franc as US yields top 5%

By Chibuike Oguh

NEW YORK, Sept 29 (Reuters) - The dollar rose to 16-month highs against the euro and Swiss franc on Tuesday as investors positioned for economic data that could offer clues on the Federal Reserve's interest rate-hiking cycle, and with Treasury yields hovering near multi-year highs.

The Australian dollar weakened after the Reserve Bank of Australia raised interest rates as expected.

The US dollar also remained near multi-month highs against other major currencies as the benchmark 10-year Treasury yield settled above 5%, after touching its highest since June 2007. Investors were also monitoring the prospects for crude supply disruptions linked to the Middle East conflict, which kept Brent crude trading above $100 a barrel.

The euro fell to $1.1312, its lowest level against the dollar since May 2025, as the currency struggles in the face of a global energy shock and growing political risk in Europe. It was last down 0.26% at $1.1341.

"At this point, we're just going data point to data point," said Eugene Epstein, head of trading and structured products at Moneycorp. "We're looking at jobs and inflation data to find out whether or not the current Fed board is justified in the hawkishness that they've been implying."

The dollar strengthened 0.17% to 0.834 against the Swiss franc .

"Widening rate differentials are dominating currency markets, lifting the dollar against all its major counterparts and wrong-footing forecasters," said Karl Schamotta, chief market strategist at Corpay, in an investor note.

Saudi Arabia has resumed oil loadings from its Red Sea port of Yanbu after restarting operations on the East-West Pipeline, according to trade sources and shipping data, improving the outlook for Middle East oil exports.

Brent crude futures <LCOc1> fell 2.56% to settle at $102.59 a barrel.

US ECONOMIC DATA IN VIEW

Investors are awaiting August's Personal Consumption Expenditures index USPCEM=ECI due on Wednesday, which is closely watched by the Fed, followed by September's nonfarm payrolls report on Friday.

Markets also weighed commentary from Fed speakers. The Fed has time to weigh data before deciding when to hike interest rates again, Federal Reserve Bank of New York President John Williams said, while Fed Governor Michael Barr made a renewed case on Tuesday for further interest rate hikes.

Following the commentary, traders appeared to cut their expectations of a rate hike at the Fed's next meeting, with futures pricing in a near 52% chance compared with 70% a day earlier.

The dollar index , which measures the greenback against a basket of currencies including the yen and the euro,
rose 0.2% to 101.40, hitting its highest level since July 28.

Australia's central bank raised its cash rate to a 15-year high of 4.60% on Tuesday in a unanimous decision, saying inflation was too high and it was prepared to hike further if needed.

The Aussie fell to its lowest in nearly two months, and was last down 0.43% versus the greenback at $0.69888.

The Japanese yen held steady against the greenback at 157.30 per dollar with markets weighing recent warnings of possible coordinated intervention by Tokyo and Washington.