Dollar Index Hits 4-week High

The dollar index softened to 101.3 on Tuesday after testing a 15-month high of 101.6 in the previous session as softer energy prices limited the outlook of a rate hike by the Federal Reserve this year. US officials stressed that a diplomatic resolution may still be achieved with Iran in their war, driving fuel prices to ease off their local peaks and trimming the risk of a rebound in energy inflation. Still, fuel prices remained elevated in a historical level as exports from the Middle East are still low. A portion of FOMC members had recently signaled that higher inflation and evidence of a robust labor market could warrant higher rates. The Federal Reserve is expected to hold its policy rates unchanged tomorrow, but rate futures continued reflect the consensus of a hike this year. The greenback held recent gains against the euro and the yen, although political volatility in the UK maintained the sterling's recent appreciation.

DXY increased to 101.60, the highest since June 2026. Over the past 4 weeks, Dollar Index gained 0.48%, and in the last 12 months, it increased 2.74%.

The dollar index traded around 101.5 on Tuesday, holding onto the previous session’s gains as investors awaited the Federal Reserve’s policy decision, with markets pricing in an over one-third chance of a rate hike. That marks an unusually high level of uncertainty this close to a Fed meeting compared with recent years. Citadel Securities also said it expects the Fed to raise interest rates this week to reinforce Chairman Kevin Warsh’s inflation-fighting credibility after the central bank chief repeatedly pledged to restore price stability. Meanwhile, the probability of a Fed rate hike in September currently stands at around 56%. The dollar also remained resilient even after President Donald Trump said the US was engaged in "good talks" with Iran to end the Middle East conflict, a development that pushed oil prices lower and eased concerns over inflation and tighter monetary policy.