Key facts
- The U.S. dollar reached a 13-month high against a basket of major currencies.
- Global stocks declined due to a sell-off in technology and semiconductor shares.
- Investor demand for the dollar increased as a safe-haven asset.
- Markets are pricing in a 37% chance of a Federal Reserve rate hike in July.
- The Korean won weakened against the U.S. dollar.
- The Japanese yen briefly hit a two-year low against the dollar.
The U.S. dollar strengthened to a 13-month high against a basket of major currencies on Wednesday, driven by investor demand for safe-haven assets amid a sell-off in global stocks, particularly in the technology and semiconductor sectors. Expectations for further U.S. Federal Reserve rate hikes also contributed to the dollar's ascent.
Markets are now pricing in a 37% chance of a 25-basis-point rate hike at the July Federal Reserve meeting, a significant increase from the previous week. The dollar index, which tracks the greenback against six major currencies, reached its highest level since May 13, 2025, at 101.44.
Other currencies experienced weakness. The euro traded near a one-year low at $1.1375, while the British pound saw a slight dip to $1.3199 following comments from a Bank of England policymaker suggesting an 'extended hold' on interest rates. The risk-sensitive Australian dollar was steady, but the New Zealand dollar hit a seven-month low.
The Japanese yen briefly touched a two-year low of 161.93 against the dollar, with some analysts predicting further weakening if the Federal Reserve proceeds with rate hikes. Despite verbal warnings from Japanese officials, sustained pressure on the yen persists due to wide U.S.-Japan rate differentials and doubts about Tokyo's commitment to intervention.
Geopolitical tensions between the U.S. and Iran regarding nuclear issues and control of the Strait of Hormuz also supported safe-haven demand for the dollar.