Dollar Index Hits 44-week High

The US dollar index rose past 100 on Monday, its highest since May of last year as no signs of de-escalation to the war in the Middle East maintained markets' preference to holding safety through the greenback. Yemeni Houthis engaged in the conflict over the weekend to threaten exports through the Red Sea, while President Trump issued new warnings to Tehran after Iranian speakers repeatedly touted US demands as unrealistic. Crude oil and fuel prices maintained their surge from the month, supporting the outlook for a hawkish response by the Federal Reserve. The Fed was due to hold its rates unchanged next month as leading labor market indicators reflected a robust labor market, while private surveys indicated higher energy costs being faced by manufacturers. The increase in energy prices also support the dollar as a safe-haven instead of the yen and the franc due to the US being a major energy exporter, in addition to forcing importers in buying more dollars for oil and LNG.

DXY increased to 100.54, the highest since May 2025. Over the past 4 weeks, Dollar Index gained 2.18%, and in the last 12 months, it decreased 3.54%.

The dollar index approached 100.5 on Monday, rising for a fifth consecutive session and returning to levels last seen in May 2025, as the conflict with Iran showed no signs of de-escalation entering its fifth week. Investors remained focused on the implications for growth and the monetary policy outlook. Oil prices continued to climb to fresh highs not seen since 2022, strengthening expectations that higher energy costs could weigh on the economy and limit the Fed’s scope to raise interest rates. As a result, the probability of a Fed rate hike in 2026 has fallen to around 20%, from roughly 35% at the end of last week. Meanwhile, Fed Chair Powell said that President Trump’s tariffs resulted in a one-time price bump and that the central bank has little control over supply shocks such as the war-driven surge in oil prices. Attention is also turning to a busy economic calendar. The greenback was mostly higher against the pound, yen, and euro.