US dollar strengthens to 13-month high on Fed rate hike expectations
Market Drivers and Global Currency Movements
By Chuck Mikolajczak
Dollar Rises on Fed Rate Hike Speculation
NEW YORK, June 24 (Reuters) - The U.S. dollar advanced for a third straight day on Wednesday to hit a 13-month high as markets braced for anticipated rate hikes from the Federal Reserve this year, while a recent selloff in technology stocks also provided support for the greenback.
Market expectations of a rate hike have increased since the Fed's policy announcement last week, with recent comments from some officials signaling a focus on inflation as the overall economy appears to be on stable footing.
Impact of Equity Selloff and Geopolitical Tensions
A recent drop in equities, including tech stocks around the globe, also helped lift the safe-haven dollar.
The S&P 500 and Nasdaq held near the unchanged mark in the latter stages of trading, with technology shares again showing weakness, as investors awaited earnings from chipmaker Micron Technology after the closing bell.
Continued uncertainty around the tentative peace deal between the U.S. and Iran also helped buoy the dollar, although oil prices fell to their lowest level since before the war began on signs more oil tankers were poised to move out of the Strait of Hormuz.
Expert Commentary on Fed Policy
"(The Fed) is trying to hike interest rates or really strongly considering being very hawkish moving forward, because the concern is that prices have gone up way too high," said Juan Perez, director of trading at Monex USA in Washington.
That, combined with caution over the Iran situation, "is what's creating this dollar dominance", he said.
Greenback Extends Winning Streak
GREENBACK EXTENDS WINNING STREAK
The dollar index, which measures the greenback against a basket of currencies, rose 0.19% to 101.58 after reaching 101.80, its highest since May 12, 2025, with the euro down 0.21% at $1.1357.
The dollar was on track for its longest streak of gains since the start of the month, and the fifth in the past six sessions.
Analyst and Market Outlook
In a note on Wednesday, analysts at Barclays said their month-end rebalancing model indicated a moderate dollar-buying signal against most major currencies by month-end.
However, the quarter-end model pointed to a strong dollar-selling signal, and "overall, the signal indicates no strong dollar directional bias against all majors at the end of June."
Markets are pricing in a 34.2% chance for a rate hike of at least 25 basis points at the Fed's July meeting, according to CME FedWatch. For September, the chance of a rate rise stands at 67%.
Investors will get another look at inflation pressures this week in the form of the U.S. personal consumption expenditures price index for May on Thursday.
Currency Movements: Sterling and Yen
Sterling Weakness Amid Political Changes
Sterling weakened 0.29% to $1.3165 after falling to $1.3137, its lowest since November, and was on track for its second straight daily decline following the resignation of Prime Minister Keir Starmer on Monday.
Yen Under Pressure as Japan Considers Intervention
Against the Japanese yen, the dollar strengthened 0.13% to 161.78. A break above 161.96 would leave the yen at its weakest level since 1986.
The latest verbal warnings from Japanese officials this week have done little to ease pressure on the currency, and the government is making plans to better manage its $1.3 trillion foreign exchange reserves for yen intervention.
The yen could weaken to 165 per dollar if the Fed raises interest rates this year, former Bank of Japan policymaker Sayuri Shirai said.
Some Bank of Japan board members called for additional rate hikes to push the central bank's policy rate closer to levels deemed neutral to the economy, a summary of opinions from their June policy meeting showed on Wednesday.
(Reporting by Chuck Mikolajczak; additional reporting by Jiaxing Li in Hong Kong and Harry Robertson in London; Editing by Thomas Derpinghaus, Jan Harvey and Barbara Lewis)
