US dollar advances against major currencies as global market volatility deepens

The US dollar extended its gains on Wednesday, climbing to a fresh 13-month high against a basket of major currencies as investors moved towards safe-haven assets amid a technology-led equity selloff and growing expectations of further interest rate hikes from the Federal Reserve.

The move came as global markets remained under pressure following a broad decline in technology and semiconductor stocks.

The selloff dragged global equities lower and prompted investors to seek refuge in the dollar and bonds.

The dollar index, which measures the greenback against a basket of currencies including the euro and the yen, rose to 101.51, its strongest level since May 2025.

Fed rate expectations lend support to the dollar

The greenback was also supported by rising expectations that the US central bank could tighten monetary policy further.

Fed officials have struck an increasingly hawkish tone, while the broader US economy has remained resilient.

Markets are now pricing in a 36% chance of a rate hike at the Fed’s July meeting, up sharply from 8.5% a week ago, according to CME FedWatch.

Expectations for September have also risen significantly, with the probability of a rate increase climbing above 70% from 29.1%.

Euro, pound, and antipodean currencies weaken

Among major currencies, the euro traded near a one-year low at $1.1363.

Sterling also slipped, with the British pound easing to $1.3194 after Bank of England policymaker Alan Taylor said an “extended hold” in interest rates was the right response to inflation pressures.

The Australian dollar, which is often seen as a risk-sensitive currency, held broadly steady at $0.6906, hovering around an 11-week low.

Mixed inflation data clouded the outlook for further policy tightening and kept rate expectations uncertain.

The New Zealand dollar fell $0.5654, marking a fresh seven-month low.

Geopolitical concerns also underpinned safe-haven demand for the dollar.

The US and Iran appeared to remain at odds over key aspects, including nuclear issues and control of the Strait of Hormuz.

That raised fresh doubts over the durability of their fragile peace arrangement.

Yen remains under heavy pressure

The Japanese yen continued to struggle, with the currency last trading at 161.55 per dollar.

A move above 161.96 would place the yen at its weakest level since 1986.

Recent verbal warnings from Japanese officials have done little to ease pressure on the currency.

Authorities are now planning to better manage the country’s $1.3 trillion foreign exchange reserves for possible intervention in support of the yen.

Former Bank of Japan policymaker Sayuri Shirai said the yen could weaken to 165 per dollar if the Fed goes ahead with interest rate hikes this year.

At the same time, a summary of opinions from the Bank of Japan’s June policy meeting showed that some board members favoured additional rate hikes to bring the central bank’s policy rate closer to levels considered neutral for the economy.

Rupee opens lower against a firm US dollar

In India, the rupee opened lower against the US dollar on Wednesday, in line with expectations.

The USD/INR pair rose to near 94.85 as the dollar hit a fresh annual high.