The US Dollar (USD) is extending gains against the majors to start the week, building on last week’s post-FOMC strength to pull the DXY above the 99.50 zone to reach its highest since August, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Fed officials dampen December expectations

"Global stocks are firm as markets continue to focus expectantly on earnings, rather than the evolving Fed outlook, lifting risk sentiment and providing a modest lift for the ZAR, MXN and AUD. The CHF is the main underperformer on the session following weaker than expected October CPI while the JPY is more or less flat—perhaps reflecting concerns that the weak JPY tone plus US focus on the exchange rate leave it prone to supportive action from the Japanese authorities."

"Dollar gains are being underpinned by firmer US yields (following the Fed) and supportive (for now) seasonals. Seasonality support may start to fade soon but the yield story may have some limited legs. Fed policymakers, free of the pre-meeting quiet period, are speaking up. Cleveland Fed President Hammack and Dallas Fed President Logan both indicated Friday that they would have preferred to hold rates stead at last week’s policy decision. Neither are voters this year but they will (presumably) vote in 2026."

"The willingness to comment on last week’s decision reflects significant differences of opinion about where policy should be right now and has helped trim OIS pricing back to reflect 15-16bps of easing risk for the December FOMC. Dollar gains look a little more persuasive this morning but the Q4 dollar rebound may still be prone to a reversal. The US government shutdown looks very likely to extend beyond the 35-day record set in 2018/19 which could also start to weigh on USD sentiment."