USD gains broadly as 10-year Treasury yield hits 5.02% before Fed decision

The US dollar is firming across the board as the 10-year Treasury yield pushes to 5.02%, extending a relentless climb driven by stubborn inflation, higher oil prices and the prospect of a more hawkish Federal Reserve. The bond market is clearly front-running the upcoming FOMC decision, with yields now bordering on a break of the highs last seen in October 2023. A sustained push above 5.02% would take 10-year yields into territory not properly explored in nearly two decades, a development that would likely reinforce dollar strength against the euro, yen and commodity currencies. Widening rate differentials are the key transmission channel, with USD/JPY particularly sensitive to US long-end moves while EUR/USD and GBP/USD face downside pressure. Elevated yields also tighten financial conditions and typically weigh on risk appetite, supporting the dollar's safe-haven bid. Traders should treat 5.02% as the pivotal technical level: a decisive break higher argues for further dollar upside into the Fed meeting, while a rejection and retreat in yields could trigger a swift unwind of crowded long-dollar positioning and spark short-covering in high-beta currencies.