The US dollar rises above 100, but the 5% US Treasury yield changes pricing logic.

(1) According to a proprietary foreign exchange framework from an institution, after the US Federal Reserve's decision in September, the US dollar regained momentum, with the US Dollar Index rebounding from a low of around 98.86 on September 8, breaking through the psychological barrier of 100, and reaching approximately 101.1 on September 23. (2) Meanwhile, the yield on the US 10-year Treasury has risen to around 5%, a significant increase from the sub-1% lows in 2020. (3) Recently, the US dollar has been strongly supported by factors such as resilient US economic growth, a hawkish Federal Reserve, oil prices at $100, and geopolitical safe-haven demand. (4) However, the institution does not believe the US dollar will experience a one-sided breakout. At these yield levels, rising term premiums are increasingly indicative of tighter financial conditions, rather than simply reflecting superior US growth. (5) Thus, its fourth-quarter framework anticipates high-level two-way consolidation. The short-term strength of the US dollar may persist, but the market may have priced in more Federal Reserve tightening than will eventually materialize. (6) From a market perspective, the positive correlation between the US dollar and US Treasury yields may weaken as term premium becomes the dominant factor. Going forward, it is important to monitor the actual interest rate path of the Federal Reserve and changes in financial conditions for their two-way impact on the US dollar.