OCBC’s Sim Moh Siong notes the Dollar is supported by higher US Treasury yields and a more hawkish Federal Reserve path, with leaner Fed communication likely to lift FX volatility. The bank still sees a rangebound USD, but warns that a clear DXY break above its 14‑month range could deliver 2–3% upside, with larger gains if Oil rises or US growth overheats.

Hawkish Fed and yields underpin Dollar

"The Fed’s hawkish shift is keeping the USD supported as markets price a more aggressive policy path. Treasury yields rose across the curve despite weaker oil, pointing to rates, not energy, as the key driver."

"Chair Warsh’s leaner communication style, seen in a shorter FOMC statement, shifts focus to incoming data and should lift FX volatility. May US core PCE is next, though softer oil may mute the signal even as headline inflation is set to rise to 4.1% YoY."

"Risks to our rangebound USD view are building. A clear DXY break above its 14-month range could open 2–3% upside."

"A larger 5%+ rally is a tail risk if oil climbs above USD100 per barrel or AI-led US growth overheats, marked by declining unemployment rate and rising medium-term inflation expectations."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)