The US dollar rose to its highest level in more than three months on Thursday with lifted by climbing US Treasury yields and fears that high global prices will persist because of the US-Israeli war on Iran.
The dollar index tracks the dollar against a basket of currencies, peaked at 101.66 and its highest since June 25. It rose 2% in September.
US inflation rose less than expected in August and July's figure was revised down. This lowered expectations of a Federal Reserve rate hike this month. In the euro zone, however the inflation jumped also showing that high energy prices still threaten the global economy.
The euro fell 0.11% to $1.1317 in Asia. It lost nearly 2.5% in September, its biggest monthly fall since July 2025 as Europe's debt and energy worries weighed on it. Sterling slipped 0.1% to $1.32495 after sliding 2.1% last month.
Ray Attrill of National Australia Bank said the dollar is now reacting more to 10-year Treasury yields than to Fed rate hike expectations. He said rising yields support the dollar for now but a stock market slump could also benefit it.
Global bonds had their biggest monthly fall in years in September. Weak government finances, heavy bond issuance and rising inflation pushed yields up. Short-term US yields eased slightly but 10- and 30-year yields hit new highs in the previous session and stayed near them on Thursday.
The dollar gained 0.54% against the yen to 158.29, after falling 1.4% in September. The yen was the strongest G10 currency last month as traders feared a possible government intervention. Some Bank of Japan policymakers saw a need to speed up rate hikes, its September meeting summary showed.
The Australian dollar fell to a two-month low of $0.6940 as slightly lower-than-expected inflation reduced the chance of another near-term rate hike by the Reserve Bank of Australia. The New Zealand dollar dropped to $0.5618 its lowest since November 2025.
