US Dollar Index at 19-Month Peak as Rate Hike Bets Mount

The greenback reached its highest level in 19 months on Wednesday. Market participants are betting the Federal Reserve will deliver another rate increase in December.

It marks a sharp turnaround from 2025. During the first six months of that year, the dollar lost more than 10%, its worst start to a year since 1973. Some interpreted that decline as evidence that US financial dominance was fading.

Why Is the Dollar Rising Again?

The US Dollar Index (DXY), measuring the dollar against six key currencies, advanced to roughly 102.9. That level was last seen in April 2025.

Higher-than-expected inflation sparked the rally. The Bureau of Labor Statistics reported that consumer prices increased 0.4% in October. Analysts had forecast a 0.3% rise.

That moves the Fed closer to tighter policy, and higher rates attract capital into the dollar. The central bank already raised rates in September, its first such move since 2023.

Fed Governor Christopher Waller now argues for considering a larger increase.

“Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”

The CME FedWatch tool places the probability of a December 9 rate hike at 87%.

Who Pays for the Dollar’s Comeback?

Gold investors are feeling the pinch first. Spot gold fell nearly 1% to $3,992.43 an ounce.

Borrowers in the US are next. Treasury yields have already climbed above 5% this week, and household credit card debt is at a record level.

Is the Dollar Really Back?

Elias Haddad of Brown Brothers Harriman told Reuters that the dollar’s widespread strength is driven mainly by a more hawkish outlook for rates.

Some analysts also link this year’s rally to safe-haven demand during the US-Israeli conflict with Iran.

Harvard economist Kenneth Rogoff’s caution from the 2025 downturn still casts a shadow.

“The dollar franchise isn’t gone, but it’s weakening materially.”

The Fed will announce its decision in four weeks, on December 9.