As US Treasury yields rise, traders are heavily betting on the US dollar.

According to the Zhongtong Finance APP, a Goldman Sachs strategist said that the yen against the US dollar exchange rate may fall to its lowest level since 1990. Discussions about the euro's fair value are quietly emerging. Throughout Wall Street, speculators are once again betting heavily on the US dollar after being burned by the unexpected rise in the dollar.

Despite the uncertainty in the stock and bond markets, a certain consensus is forming around the US dollar: as long as the Federal Reserve continues to maintain high interest rates, the US dollar may continue to rise - at least for the remainder of this year.

This view reflects the growing cracks in the global economy as the United States demonstrates astonishing resilience while Europe and Asia struggle with growth. With the Federal Reserve focusing on curbing inflation, this is expected to keep US interest rates much higher than those in most parts of the world, stimulating demand for the US dollar as investors flock to the United States in search of higher returns than those available domestically.

As people realize that the Federal Reserve may maintain a tightening monetary policy next year, this attractiveness is increasing. This has pushed US Treasury yields to their highest level since the 2008 financial crisis and pushed the US dollar against other major currencies higher since mid-July.

Jane Foley, Head of Foreign Exchange Strategy at Rabobank, said, "From higher to longer, the resilience of the economy will drive interest rate cuts." "The US dollar is a currency that everyone truly understands."

At the beginning of this year, many investors expected the US dollar to fall once inflation eased, economic growth slowed, and the Federal Reserve changed its most aggressive rate hike policy since the early 1980s. On the contrary, the US economy has defied pessimistic expectations, and Federal Reserve officials have continued to make hawkish statements, pushing the US dollar index back to its highest level since November last year.

Trading in the futures and options markets indicates that investors expect this trend to continue. Data from the US Commodity Futures Trading Commission shows that as of last Tuesday, speculative traders increased their bullish bets on the US dollar to the highest level since June last year, while asset management companies reduced their bearish bets to the lowest level since October last year. The options market is hardly concerned about the US dollar changing its course soon, with Bloomberg's one-month risk reversal index for the US dollar rising to its most bullish level since the end of March.

At the same time, some bank analysts are also constantly raising their forecasts for the US dollar's trend.

Foley of Rabobank currently expects the euro to US dollar exchange rate to fall to $1.02 by the end of this year, while Jordan Rochester of Nomura Securities recently stated that parity between the euro and the US dollar is not impossible (currently around $1.05). Goldman Sachs strategists expect the yen against the US dollar exchange rate to fall to 155 yen per dollar within six months, a level not seen in Japan since the bursting of the real estate bubble in the 1980s. Of course, if the US economy struggles under the pressure of high interest rates, the upward trend of the US dollar may reverse, and the influx of funds into the US dollar may indicate that it has appreciated too much. Charu Chanana, a market strategist at Saxobank, stated in a report this week that the risks to the US economy are accumulating, although she believes there is still room for the US dollar to rebound.

Since the mid-summer, Leah Traub, a portfolio manager at Lord Abbett & Co., has been predicting that the market's bet on interest rate cuts will be further delayed, thereby boosting the US dollar.

Traub said, "It's different now than in 2007." "Given the current level of inflation, it is not easy for the Federal Reserve to cut interest rates. It's one thing for the inflation rate to drop from 4% to 3%, but it's another thing for it to rise to 2%."

Strategists at Bank of America also believe that monetary policy will support the US dollar until mid-2024. In a recent report, they emphasized that the US dollar against the US dollar has exceeded the bank's year-end expectation of 1.05 euros to the US dollar.

Even Win Thin, the global head of foreign exchange strategy at Brown Brothers Harriman & Co., who has a long-term bullish view on the US dollar, expressed surprise at the rapid rebound of the US dollar from last week's decline, when traders were concerned that the congressional deadlock would lead to a government shutdown. "The US dollar's pullback was much smaller than I expected, but it's clear that the risk of a government shutdown has put pressure on the US dollar, and that risk has now passed," Thin said.

"It's revving up," he said. "Strong data, higher yields, and hawkish comments from the Federal Reserve are all very favorable for the US dollar."