The U.S. dollar remained close to a two-week high on Tuesday after fresh labor market data showed that job openings held relatively steady in July.
The data reinforced the view that the U.S. labor market remains resilient. At the same time, rising global bond yields continued to support expectations for tighter Federal Reserve policy.
The Dollar Spot Index gained around 0.2% to 99.61 as the greenback extended its recent advance.
Treasury Yields Support the Dollar
A broad sell-off in global government bonds pushed benchmark yields higher and increased expectations for another Federal Reserve rate hike.
The U.S. 10-year Treasury yield climbed to around 4.80%, its highest level since January 2025.
The rise followed hawkish comments from Federal Reserve Chair Kevin Warsh at Jackson Hole, which caused investors to sharply reassess the outlook for U.S. interest rates.
Higher Treasury yields tend to support the dollar because they make U.S. assets more attractive to global investors.
JOLTS Data Shows Resilient Labor Market
U.S. job openings were little changed at approximately 7.3 million in July.
The job openings rate remained at 4.4%, suggesting that demand for workers continues to hold up despite signs of gradual cooling elsewhere in the labor market.
Hiring declined to around 5.1 million from 5.3 million in June.
Meanwhile, total separations also slipped to approximately 5.1 million.
The number of workers voluntarily quitting their jobs remained broadly unchanged at around 3.1 million.
Quits are closely watched because they can provide insight into workers’ confidence in their ability to find new employment.
Markets Increase Fed Rate Hike Expectations
Money markets have become significantly more hawkish following Warsh’s Jackson Hole remarks.
Interest-rate swaps now indicate roughly a 74% probability of a 25-basis-point Federal Reserve rate increase at the Sept. 17 policy meeting.
That compares with approximately 34% before Warsh’s speech.
The sharp shift in expectations has widened the interest-rate advantage of the U.S. dollar over several lower-yielding currencies.
Euro Falls Despite Higher Headline Inflation
The euro weakened against the dollar, with EUR/USD falling around 0.2% to approximately $1.1592.
Investors were assessing mixed inflation data from the eurozone.
Headline consumer price inflation accelerated to 3.3% year over year in August, up from 2.9% in July.
However, core inflation, which excludes volatile items such as energy, food, alcohol and tobacco, unexpectedly eased to 2.4% from 2.5%.
Services inflation also slowed to around 3%.
The divergence between headline and underlying inflation complicates the outlook for European Central Bank policy.
While higher energy prices are lifting headline inflation, softer core readings could make the case for additional monetary tightening less straightforward.
Japanese Yen Remains Near 160 Per Dollar
The Japanese yen edged slightly higher to around 159.85 per dollar.
However, the currency remained close to the psychologically important 160 level, which has previously attracted attention from Japanese authorities concerned about excessive currency weakness.
The yen received temporary support following comments from U.S. Treasury Secretary Scott Bessent during a gathering of G20 finance officials.
Bessent called for tighter monetary policy from the Bank of Japan, increasing speculation that Japanese policymakers could raise interest rates again.
BOJ Rate Hike Expectations Increase
Markets responded by increasing expectations for a Bank of Japan rate hike at its Sept. 17–18 meeting.
Swap markets indicated a probability of around 88% for another increase.
The more hawkish outlook helped push Japan’s 10-year government bond yield to approximately 3.00%, its highest level in decades.
However, the yen remains vulnerable while U.S. Treasury yields stay elevated.
A wide gap between U.S. and Japanese interest rates can continue to favor the dollar against the yen.
Oil Prices Add to Inflation Concerns
Foreign exchange markets are also closely watching rising crude oil prices.
Oil remained near $91 per barrel amid heightened geopolitical tensions in the Middle East.
Higher energy prices can contribute to renewed inflation pressures, increasing the risk that major central banks will maintain restrictive monetary policy for longer.
That backdrop has added volatility across both bond and currency markets.
U.S. Jobs and Inflation Data Take Center Stage
Investors will now focus on upcoming U.S. labor market data for further clues about Federal Reserve policy.
The ADP private payrolls report will provide another indication of employment conditions, while Friday’s nonfarm payrolls report will be particularly important for markets.
A stronger-than-expected jobs report could reinforce expectations for a September Fed rate hike.
Attention will then shift to the August U.S. Consumer Price Index report next week.
A hotter-than-expected inflation reading could push expectations for a September rate increase even higher and potentially extend the dollar’s recent rally.
For now, resilient U.S. economic data, rising Treasury yields and increasingly hawkish Federal Reserve expectations continue to provide support for the U.S. dollar.
