Dollar surges to year-long peak as Fed rate hike bets intensify

The greenback’s momentum is twofold: aggressive interest rate expectations and a flight to safety driven by unresolved Middle East tensions. The dollar index reached 101.13, pressuring global peers. Meanwhile, the Japanese yen remains under acute strain, trading at 161.48 and nearing its weakest point since 1986. Japanese Finance Minister Satsuki Katayama consulted with U.S. Treasury Secretary Scott Bessent on Monday to discuss potential currency intervention, though Tokyo has refrained from signaling a definitive strategy to stabilize the volatile market.

Elsewhere, the euro fell to $1.1414, a level not seen since March, after European Central Bank President Christine Lagarde minimized concerns over second-round inflation. The British pound faced its own period of transition following Prime Minister Keir Starmer’s resignation. However, uncertainty began to dissipate as Health Minister Wes Streeting backed Andy Burnham for the leadership, a move Commerzbank analyst Michael Pfister noted as a stabilizing factor for the currency. Despite this, risk-sensitive assets like the Australian dollar struggled, sliding 0.8% to $0.6945.