The US Dollar Index (DXY) climbed above 102.00, trading near 102.20 in early Asian hours on Monday, buoyed by safe-haven flows amid heightened geopolitical tensions and shifting expectations for US Federal Reserve (Fed) policy [1]. The Dollar's strength was attributed to rising US Treasury yields, ongoing conflicts in the Middle East, and fiscal concerns in France, which collectively increased demand for the greenback as a safe-haven asset [1]. Matthew Ryan, head of market strategy at Ebury, noted that the Dollar is the main beneficiary in the current environment, as both higher Treasury yields and a global debt selloff are driving flows into US assets [1].
US labor market data showed Nonfarm Payrolls (NFP) increased by 29K in September, a sharp slowdown from the 133K gain in August and well below the consensus estimate of 90K [1][3]. The US unemployment rate also rose to 4.2% in September from 4.1% in August [1]. These weaker-than-expected jobs figures led traders to scale back expectations for a Fed rate hike in October, with CME FedWatch Tool data showing market-implied odds of a rate hold at 82.3% (up from 35.8% a week earlier) [1], and only a 22.1% chance of a hike this month compared to 70% earlier in the week [3]. However, markets still anticipate a hike by year-end and additional increases in 2027 [1][2].
Geopolitical developments further supported the Dollar. The head of Yemen’s governing body announced new military operations against the Houthis, while Iranian officials reiterated that the Strait of Hormuz would remain closed until their conditions are met [2][3]. Ukraine also reported deadly Russian air strikes, maintaining a high geopolitical risk premium and pushing the Dollar close to its highest level since April 2025 [2].
The strong Dollar pressured other currencies, with NZD/USD falling below 0.5600, near its lowest level since November 2025 [2]. Despite soft US PCE and NFP data, persistent geopolitical risks and safe-haven demand kept the USD in favor, suggesting further downside for NZD/USD unless the Reserve Bank of New Zealand raises its Official Cash Rate on October 28 [2]. Meanwhile, gold prices initially rebounded to near $4,160 as traders trimmed Fed rate hike bets, but ultimately closed 0.6% lower at $4,157/oz as elevated real yields capped gains [3].
Fed’s Logan delivered a notably hawkish message, with a 9.2/10 FXS Speechtracker score, calling for at least 50 basis points more in rate hikes and several additional moves to restore price stability [1][3]. This reinforced the perception that current policy is not yet restrictive enough, supporting the Dollar despite softer economic data [1][3].
CONCLUSION
The US Dollar Index strengthened above 102.00, driven by safe-haven flows amid geopolitical tensions and shifting Fed rate expectations following weaker US jobs data. Despite softer economic indicators, hawkish Fed commentary and global uncertainties continue to support the Dollar, pressuring rival currencies and capping gold's upside. Market participants remain focused on upcoming Fed communications and geopolitical developments for further direction.