DXY Rises Toward 4-Week High

The dollar index rose for a fourth consecutive session to 101.3 on Tuesday, its highest level since April last year, extending gains as investors continued to price in the prospect of Fed rate hikes this year. The greenback also drew support from a flight to safety triggered by a sell-off in technology stocks. A hawkish message from the Fed last week has led markets to increase bets on monetary tightening, with traders now assigning a roughly 68% probability to a rate hike in September, up from 29% a week ago. Additional support came from stronger-than-expected flash S&P Global PMI data, which pointed to resilient economic activity in June. Investors will now turn their attention to this week's PCE inflation report, the Fed's preferred measure of inflation, for further clues on the path of interest rates. Among major currencies, the dollar posted its strongest gains against the Australian dollar and the euro.

The dollar index traded around 101 on Tuesday, hovering near its highest level since May 2025 as investors assessed signs of progress in US-Iran peace talks while continuing to gauge the outlook for Federal Reserve interest rate hikes this year. In a key development, Washington granted Tehran a 60-day license to sell oil on international markets, boosting expectations of a faster recovery in global supply. Meanwhile, markets remain positioned for Fed rate hikes following the central bank’s hawkish stance last week and upward revisions to its inflation projections. Both Deutsche Bank and BofA Global Research have updated their forecasts to include a rate increase in September. Investors are now focused on this week’s PCE report, which contains the Fed’s preferred inflation measure and could offer fresh clues on underlying price pressures.

The dollar index rose to 101 on Monday, reaching a new high in more than a year, as investors returned from the long weekend and refocused on developments in the Middle East and the monetary policy outlook. The US and Iran agreed on a roadmap toward a final deal to end their conflict within 60 days, with Iran’s foreign minister citing “progress” in negotiations, contributing to a decline in oil prices. However, markets continue to anticipate that the Federal Reserve will raise the fed funds rate this year, following a hawkish tone from the Fed last week and upward revisions to inflation forecasts. Attention now turns to this week’s PCE report, which includes the Fed’s preferred inflation gauge and is expected to provide fresh insight into underlying price pressures. The dollar strengthened most against the Japanese yen amid rising intervention concerns, while it weakened slightly against the British pound following UK Prime Minister Keir Starmer’s resignation.