USD strengthens as Treasury yields realign with dollar correlation

The US Dollar Index has gained 0.3% to 104.50 as the traditional correlation between Treasury yields and dollar strength reasserts itself following recent divergence. 10-year Treasury yields rose 8 basis points to 4.42%, supporting dollar buying across major pairs. EUR/USD retreated 0.25% to 1.0780, while AUD/USD fell 0.4% to 0.6520 amid renewed risk-off sentiment. The realignment comes as markets digest Federal Reserve officials' hawkish commentary suggesting rates may remain elevated through 2025. EUR/GBP continues its upward trajectory, adding 0.15% to 0.8425 as UK economic concerns persist. NZD/USD underperformed, dropping 0.5% to 0.5950 on commodity weakness. Technical analysis shows the Dollar Index testing resistance at 104.75, with a break potentially opening the path to 105.50. Traders await Thursday's PPI data which could further influence Treasury yields and dollar direction.