US Dollar Index eyes establishment above 101.00 as yields approach 3%

• The DXY is aiming to balance above 101.00 on a mega rate hike expectation.
• The 10-year US Treasury yields are eyeing to kiss 3% for the first time in the last three years.
• Speeches from Fed’s Powell, ECB’s Lagarde, and BOE’s Bailey will remain in focus.

The US dollar index (DXY) is auctioning in a narrow range of 100.094-101.03 in early Tokyo. The asset is building a base before surpassing the barricade of 101.00 as the DXY has been underpinned by the bolstered expectations of increasing interest rates to 3.5% by the end of the fiscal year 2022.

Speeches from the Fed policymakers

St. Louis Federal Reserve (Fed) President James Bullard in his speech on Monday opened doors for a 75 basis point (bps) interest rate hike by the Fed in its May monetary policy. The expectation of a mega interest rate hike has risen after the US economy posted March’s inflation print at 8.5%.

Meanwhile, Chicago Fed President Charles Evans on Tuesday that he's "comfortable" with a round of rate hikes this year that includes two 50 bps increases and reaches a neutral setting by year-end, but he does not see the need for bigger hikes as per Reuters.

US Treasury Yields surge higher

The 10-year US Treasury yields are looking to tap the psychological resistance of 3% for the first time in the last three years. Rising bets over a tight rate environment for a longer period are bolstering the yields, which are eventually pushing the greenback higher.

Key events this week: Building Permits, Housing Starts, Initial Jobless Claims, and S&P Global PMI.

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, International Monetary Fund (IMF) meeting, People’s Bank of China (PBOC) interest rate decision, Fed Chair Jerome Powell speech, European Central Bank (ECB) President Christine Lagarde speech, and Bank of England (BOE) Governor Andrew Bailey speech.