Higher Yields Fail to Boost Dollar Index

The dollar index traded in an extremely narrow range on Tuesday, currently near 98.83, roughly flat on the day. Despite the 10-year U.S. Treasury yield hovering around 5.3%, the highest since June 2007, this notable yield advantage has not translated into dollar strength.

**Global Yield Rises Undermine Dollar**

The core reason for the dollar's failure to strengthen is that the current surge in bond yields is not a U.S.-specific phenomenon but a global move. Japan's 10-year government bond yield rose to a three-decade high, while Germany's 30-year yield also hit its strongest level since 2011. Since currencies are relative prices, when yields rise across major economies simultaneously, the dollar's yield advantage over other currencies does not materially widen, making it difficult to attract independent buying support.

**Technical Resistance Caps Rebound**

On the technical chart, the dollar index's 200-day exponential moving average near 99.75 has capped upside attempts for two consecutive weeks. Market participants note that this moving average is currently flat, forming key short-term resistance. Until this technical level is decisively broken, any intraday bounce in the dollar index could attract selling pressure, keeping prices range-bound at lower levels.

**Market Watches Fed Policy Divergence**

Current market expectations regarding the Federal Reserve's future policy path remain divided, adding to dollar volatility. Some argue that if inflation prompts the Fed to keep rates higher for longer, the dollar could find support and challenge the prior high near 100.450. On the other hand, if rate-cut expectations intensify, the dollar may face further downside pressure. Until fundamental signals become clearer, the dollar index is likely to remain range-bound between 98.50 and 99.75.