Dollar at 13-month high economy

The dollar continued to achieve gains today, Wednesday, and reached its highest level in 13 months against a group of major currencies, as investors seek protection from the risks of a wave of selling in technology company stocks and prepare for the Federal Reserve (the US central bank) to raise interest rates.

Stock market fluctuations continued following a wide wave of selling in the technology and semiconductor sectors, which enhanced demand for the dollar and bonds as safe havens.

At the same time, expectations for a hike in US interest rates continued to rise, as Fed officials increasingly adopted a hawkish tone in light of the continued strength of the US economy.

Disagreements between the United States and Iran over some key aspects of their framework agreement also led to increased demand for safe haven assets.

The dollar index – which measures the performance of the US currency against a group of major currencies – rose to 101.69 points, recording the strongest level since May 2025. The index increased 0.2% during the day.

“The US dollar remains the safe haven of choice,” National Australia Bank head of FX research, Ray Attrill, said. “The momentum is clearly in its favor at the moment.”

According to the CME Group’s Fed Watch tool, markets see a 36% probability of raising US interest rates at the Federal Reserve meeting next July, compared to 9% a week ago.

The probability of raising interest rates in September increased to more than 70% from 29%.

• The euro fell ⁠0.3% to the lowest level in more than a year at $1.134, with the US currency rising.
• The British pound fell slightly to $1.319, and Alan Taylor, a monetary policy maker at the Bank of England, said that “keeping interest rates unchanged for a longer period” is the correct response to inflation pressures.
• The highly risk-sensitive Australian dollar fell 0.3%to US$0.689, the lowest level since early April, with mixed inflation data clouding expectations for a rate hike.
• The Japanese currency was trading at 161.69 yen against the dollar, trying to regain some of its gains in light of the continued strength of the US currency. If it exceeds 161.96, the yen will reach its lowest level since 1986.

The latest verbal warnings issued by Japanese officials this week contributed only to a limited extent to easing the ongoing pressures on the currency, and the government is making plans to improve the management of its foreign exchange reserves amounting to $1.3 trillion to intervene in the exchange market.

A summary issued today, Wednesday, of the views of Bank of Japan board members during the June meeting on monetary policy showed that some of them called for raising interest rates again, to bring the key interest rate closer to levels considered neutral for the economy.