The U.S. dollar strengthened on Wednesday, benefiting from rising bond yields after the release of healthy U.S. economic data, while weak German industrial orders weighed on the euro.

At 4:35 AM ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% higher at 108.690.

Dollar strengthens on rising Treasury yields

The dollar continued to strengthen on Wednesday, following the previous session's positive tone after data showed U.S. job openings rose unexpectedly in November, layoffs were low, while service sector activity increased in December and a measure of prices paid for inputs hit a two-year high.

That sent the 10-year Treasury yield to an eight-month high, while the benchmark 30-year yield approached the 5% level. "Yesterday's US data releases were hawkish for the Fed, and the implied probability of a March rate cut has now fallen below 40%," analysts at ING said in a note.

"The most remarkable print was the ISM prices paid subcomponent, which jumped to its highest level since January 2023. If a generally resilient economy is already priced in when the Fed meets in December, a resurgence in inflation concerns could prompt a more hawkish adjustment in the policy message."

The Federal Reserve cut the number of rate cuts it expects this year to two at its December meeting, but traders are now pricing in only about 37 bps of easing so far this year, according to LSEG data.

There's more data to digest on Wednesday, in the form of monthly ADP private payrolls and weekly jobless claims, ahead of Friday's closely watched US jobs report for more clarity on the health of the world's largest economy.

Source: Investing.com