Afternoon June 23, Dollar Index - index tracking strength of greenback against basket of 6 major currencies - rose 0.15% to 101.17 points. Highest level since May 2025.
US dollar strengthened as investors bet US Federal Reserve (Fed) will raise rates soon, though crude oil prices fall as Middle East tensions cool. Futures market activity shows probability of Fed rate hike before September exceeded 80%.
Dollar Index movement over past year. Chart: Market Watch
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Bank of America Global Research and Deutsche Bank dropped previous forecasts of unchanged monetary policy, now expect Fed rate hike this year. Reason: US economy remains resilient.
"Currently, USD reflects expectations of higher rates. USD also supported as Middle East conflict not fully resolved and other uncertainties remain," Tommy von Bromsen - forex strategist at Handelsbanken explained.
One euro now buys only 1.14 USD - lowest since March. Meanwhile, British pound fell slightly, to 1.32 USD per GBP. Day earlier, pound strengthened when Prime Minister Keir Starmer announced resignation.
Risk-sensitive currencies also under pressure. Australian dollar fell 0.8% to 0.6945 USD per AUD - lowest since early April. New Zealand dollar lost 0.5%.
Japanese yen - favored safe-haven currency - trades at 161.48 JPY per USD. On June 22, price hit 161.93 - lowest in nearly two years. If rate breaks 161.96, yen will fall to lowest since 1986.
"Volatility possible as yen nears these levels. Market expects Japan to signal intervention or directly intervene in forex market," von Bromsen said. Reuters cited sources saying Japanese Finance Minister Satsuki Katayama held online meeting with US Treasury Secretary Scott Bessent on June 22.