HSBC Strategist Forecasts Modest Dollar Gains as Treasury Yields Rise

The forecast reflects a historically ambiguous relationship between dollar strength and yield levels, leaving the path for US bond and currency markets less certain than simple rate-differential...

Daragh Maher, senior foreign exchange strategist at HSBC, said on September 24, 2026, that he expects only modest appreciation in the US dollar as Treasury yields rise, stopping short of predicting a strong rally. "We don't think the dollar will knock it out of the park," Maher said in an interview on Bloomberg Surveillance, as reported by Bloomberg.

Maher described what he called an "ambiguous relationship" between the US dollar and Treasury yields. That framing runs counter to a commonly cited mechanism in currency markets: that higher US yields attract foreign capital into dollar-denominated assets, lifting demand for the currency and pushing its value up against peers.

The dollar's relationship with yields has been a focal point for US investors in 2026, as the Federal Reserve has navigated a policy path that balances residual inflation concerns against slowing economic growth. When yields rise in response to Fed tightening or fiscal supply pressures, the dollar does not always follow in lockstep, a pattern Maher's comments appear to reference.

Treasury yields affect US investors across a wide range of asset classes. Higher yields raise borrowing costs for US corporations, compress equity valuations through higher discount rates applied to future earnings, and affect mortgage rates for US consumers. The 10-year Treasury yield is a benchmark used in pricing trillions of dollars in loans, bonds, and derivatives.

The dollar index, known as the DXY, measures the US dollar against a basket of six major currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. A modest dollar appreciation, as Maher described, would represent a smaller move than the index's historical swings during prior rate-hiking cycles. The precise current level of the DXY at the time of Maher's comments was not specified in the Bloomberg report.

For US investors holding international equity funds or multinational corporate stocks, the direction of the dollar carries direct portfolio implications. A stronger dollar reduces the value of foreign earnings when translated back into US currency, a factor that weighs on reported revenue and profits for large US companies with significant overseas operations. Conversely, a restrained dollar gain, as Maher projects, would limit that headwind.

Maher did not specify a numerical target for the dollar or a time horizon for the appreciation he described. What would clarify the forecast further includes Federal Reserve forward guidance, the trajectory of the US fiscal deficit (which affects Treasury supply and yield levels), and incoming inflation data from the Bureau of Labor Statistics.

HSBC is one of the largest global foreign exchange dealers by volume, giving its strategists broad visibility into cross-border capital flows that influence the dollar. However, institutional FX forecasts carry known limitations: the Bank for International Settlements has documented in prior reports that even large dealer forecasts frequently diverge from realized exchange rate outcomes at horizons beyond a few weeks.

The interplay between yields and the dollar is also relevant to the Federal Reserve's own policy calculus. A rising dollar tightens financial conditions for US importers and reduces imported inflation, which can factor into the Fed's assessment of whether additional rate action is needed. Fed meeting minutes and statements from the Federal Open Market Committee remain the primary public record of how policymakers weigh these dynamics.

For US fixed-income investors specifically, a yield rise that does not produce a proportionate dollar rally may indicate that foreign demand for Treasuries is not keeping pace with increased supply, a scenario that would put upward pressure on yields through a different mechanism than Fed rate moves alone. Whether that is the driver behind the ambiguous relationship Maher cited was not detailed in the Bloomberg report.