FX markets are settling down after a big week of central bank policy announcements. Economists at ING discuss the USD outlook.

4.50% on the US 10-year yield could pressure risky assets

The US 10-year Treasury yield has edged up to 4.50%, the highest since 2007. This rise in US yields—marking higher risk-free rates—creates headwinds for risky assets such as equities, credit, and emerging markets. Indeed, even the AI-powered S&P 500 is having a bad month, though it is still up 12.8% year-to-date. This equity correction is supportive news for the dollar.

Expect DXY to remain bid and there is a scenario where the dollar stays strong into mid-October, when large US corporations based in California need to pay their taxes.