The dollar index (DXY) rose to 101.71, its highest level in 13 months. Markets lifted the implied probability of a Federal Reserve rate hike in July to 35% from 9% a week earlier, while September pricing moved above 70%. Selling pressure in technology stocks and a stalemate in U.S.-Iran talks added to safe-haven demand. The euro, sterling, Australian dollar and yen all weakened, with the yen sliding to 161.66, close to its lowest level since 1986.

The dollar index (DXY) rose to 101.44 on Wednesday, its highest level in 13 months since May 13, 2025. Demand was supported by safe-haven buying after a sharp pullback in global technology shares and by firmer expectations for Fed rate hikes. Markets are pricing a 37% chance of a 25-basis-point hike in July and 70% in September, according to CME FedWatch. The yen slid to 161.57, while the euro touched $1.1375 and sterling and the New Zealand dollar also came under pressure.

Malaysia’s ringgit is expected to remain under pressure this week, trading in a RM4.13–RM4.15 range versus the US dollar. The outlook reflects continued market expectations of a possible 25basispoint US Federal Reserve rate hike later this year, which has supported the dollar and weighed on regional currencies, including the ringgit. Last week, the ringgit weakened from 4.0555/0600 to 4.1340/1395 and also fell against the pound, yen, euro and major ASEAN currencies.

The dollar rose to 161.3 yen, closing in on the 40-year high of 161.96, keeping markets focused on whether Japanese authorities will intervene. The Federal Reserve’s latest dot plot showed nine officials still see a rate hike by year end, adding to pressure on the yen in a low-liquidity holiday window. While the Bank of Japan lifted rates this week to a 31-year high, they remain well below global levels, and the interest-rate gap has supported the dollar.

The Indian rupee strengthened for a second straight day on Friday, ending 7 paise higher at 94.33 against the U.S. dollar as expectations of faster progress on an interim India-U.S. trade deal lifted sentiment. Brent crude futures fell 0.65% to USD 79.33 per barrel, while the dollar index slipped 0.08% to 100.76. Despite a sharp selloff in local equities, foreign institutional investors were net buyers of Indian stocks worth Rs 4,859.07 crore, according to exchange data.

The Canadian dollar fell to 70.56 U.S. cents on Friday, its lowest level in about a year. Markets sharply raised expectations for U.S. rate hikes after the Fed’s June FOMC meeting, including an 88% probability of a hike in September, helping lift the U.S. dollar index 1.3% over the week. The Bank of Canada has held its policy rate at 2.25% for five straight decisions, widening the policy gap with the United States. The move has been reflected in the DXY, giving the dollar index clear short-term upward momentum.

The Indian rupee rose 0.83% this week, its strongest weekly performance since the week ended April 3 and the best in nearly 11 weeks. Support came from recent Reserve Bank of India measures aimed at attracting dollar deposits and lowering hedging costs, alongside continued foreign inflows into Indian government bonds and a pullback in Brent crude that eased imported inflation pressure. The rupee came under mild pressure on Friday as the dollar index climbed to a one-year high and Middle East talks faced a setback, but it still finished the week notably stronger.

Hawkish signals from the Federal Reserve have reinforced expectations for higher U.S. interest rates. Hedge funds quickly added bullish dollar options against the pound and the euro, with USD/GBP call volume running at more than five times puts and large (≥€200 million) USD/EUR calls hitting their highest volume since March 3, data show. Positioning in dollar-yen was more balanced as markets weighed the risk of Japanese official intervention to support the yen.

The Indian rupee has climbed 0.8% this week to a six-week high, supported by stronger inflows into Indian bonds and a slowdown in foreign equity outflows. Importers and exporters have also shifted toward more two-way hedging activity. The move comes as India takes steps to attract dollar inflows and crude oil prices plunge after the U.S.-Iran peace deal, even as the dollar index rises 1% this week to 100.92 on the Fed’s hawkish signals.

The Federal Reserve struck a more hawkish tone, with nearly half of policymakers now projecting a rate hike this year, while fed funds futures imply a 69% chance of an increase by September. Recent U.S. jobs reports have come in well above economists’ expectations, and weekly jobless claims fell again, adding to rate-hike expectations. The dollar index rose to 100.8, its highest level in a year.