Dollar Hits Highest Since July on Strong US Business Activity Data

The Bloomberg Dollar Spot Index rose as much as 0.6% on Wednesday to its highest level since July 30, after US business activity expanded at the fastest pace in over five years, reinforcing expectations for continued Federal Reserve rate hikes. The greenback is up 1.3% this month, with all Group of 10 currencies falling against it. US Treasury yields climbed following the data release as inflation concerns persist. Money markets are now pricing in at least one quarter-point Fed increase by year-end, with an October move seen as more likely than not. "The Fed story is dominant," ING strategist Francesco Pesole wrote. "Hawkish Fedspeak is enough to keep dollar in demand." Bank of America's Alex Cohen cited "fundamentals lining up for more dollar upside." Options pricing shows traders favoring the greenback across tenors, with short-term sentiment the most bullish since July.