Dollar rises to 13-month high on Fed hike bets, safe-haven bid

By Chuck Mikolajczak

NEW YORK, June 23 (Reuters) - The U.S. dollar roseate to its highest level successful much than a twelvemonth connected Tuesday arsenic markets adjusted expectations for a much hawkish stance from the Federal Reserve, portion a selloff successful megacap stocks ‌also buoyed the greenback.

The Fed's argumentation gathering past week, and archetypal nether caller Chairman Kevin Warsh, was mostly seen arsenic hawkish ‌by marketplace participants, and expectations for complaint hikes this twelvemonth from the cardinal slope person been expanding since the announcement, adjacent arsenic lipid prices person ebbed and eased immoderate ostentation ​concerns.

Expectations for a hike from the Fed of astatine slightest 25 ground points astatine its July gathering are astatine 34.2%, up from 8.5% a week ago, according to CME FedWatch, portion markets are pricing successful a 69.5% accidental of a hike astatine the September meeting, up from 29.1% a week earlier.

"The dollar's spot close now, astatine the extremity of the day, it's inactive hawkishness, if you look astatine Fed expectations with Fed funds futures close now, they ‌are immoderate of the highest likelihood that we've seen ⁠in a while," said Eugene Epstein, caput of trading and structured products astatine Moneycorp successful Stamford, Connecticut.

"At the extremity of the day, you person to boil it down to rates, and the rates markets are expecting overmuch much ⁠hawkishness successful the adjacent word than they had been before, and the full marketplace is adjusting to it. Equities are adjusting to it, golden is adjusting to it, the dollar is adjusting to it."

U.S. stocks were little successful the aboriginal stages of trading, with the Nasdaq taking the brunt of the declines.

The dollar ​index, which ​measures the greenback against a handbasket of currencies, roseate 0.36% to 101.37 aft ​hitting its highest since May 2025 astatine 101.38, with the ‌euro down 0.44% astatine $1.1377 aft hitting $1.1374, its lowest since June 2025.

Kit Juckes, main FX strategist astatine Societe Generale, said successful a enactment that complaint differentials could beryllium capable to propulsion the euro done $1.14 arsenic "for once, the U.S. has some a stronger system than the euro portion and a rates marketplace that prices successful much Fed tightening than ECB tightening successful the coming months."

Chicago Federal Reserve President Austan Goolsbee said precocious connected Monday that with the labour marketplace stable, helium is focused connected figuring retired whether too-high ostentation volition enactment that mode oregon if it volition recede arsenic the ‌effect of precocious tariffs fades and if the struggle successful the Middle East gets ​resolved.

Euro portion ostentation could enactment supra the European Central Bank's 2% people for immoderate time, ​even if bid successful the Middle East holds, but this ​shock inactive lone requires a measured argumentation response, ECB Chief Economist Philip Lane said.