The US Dollar Index rose nearly 2% in September, marking its best monthly performance since March.

The US Dollar Index rose nearly 2% in September, marking its best monthly performance since March. The Federal Reserve shifted its policy focus back to curbing inflation, driving market expectations for rate hikes and higher US Treasury yields, thereby supporting the dollar. Although the latest PCE inflation data came in lower than expected, leading traders to lower their expectations for a rate hike in October, the market has fully priced in a rate increase in December and expects the Fed to tighten by about 90 basis points over the next 12 months. Recently, Federal Reserve officials have continued to deliver hawkish signals. New York Fed President Williams stated that another rate hike later this year "may be appropriate." Meanwhile, US economic data remains strong, the Iran war has driven up energy prices and heightened inflation risks, and the 30-year US Treasury yield climbed to its highest since 2002 this week. In September, apart from the Japanese yen, all other G10 currencies depreciated against the dollar. However, some technical indicators show that the dollar’s rally may be starting to overextend, as momentum indicators have entered overbought territory.