Dollar hits 13-month high as Fed hike bets surge

The dollar climbed to 101.51, its strongest level since May 2025, as traders rushed into safety and repriced the odds that the Federal Reserve could raise rates again this summer. The move pushed the euro to about $1.1363, near a one-year low, while the yen traded around 161.55 per dollar and hovered just shy of a break that would put it at its weakest since 1986.

The rally gathered speed after the Federal Reserve kept its benchmark rate in a range of 3.50% to 3.75% on June 17, but stripped out language that had signaled a bias toward cuts. The Fed’s updated projections showed nearly half of policymakers expected a hike in 2026, and Kevin Warsh did not submit a dot. CME FedWatch pricing put the chance of a July hike at 36.3%, up from 8.5% a week earlier, while the odds of a September move rose to 69.1% from 29.1%.

A firmer dollar makes imported goods and overseas travel more expensive for U.S. consumers, while putting pressure on multinational companies that earn sales abroad but report in dollars. Exporters face the sharper edge of the move: every rise in the currency makes American products less competitive in foreign markets, especially against rivals in Europe and Japan.

Wall Street’s selloff fed the flight to cash and Treasuries. On June 23, the Philadelphia SE Semiconductor index fell 7.9% and the S&P 500 information technology sector dropped 3.7%. The Nasdaq Composite lost 2.21% and the S&P 500 fell 1.44%, closing at more than one-week lows as investors pulled back from the megacap technology names that had driven much of this year’s market gains. Debt-funded artificial intelligence spending and a more hawkish Fed added to the pressure.

Japan’s authorities were ready to respond appropriately to exchange-rate moves at any time. “The U.S. dollar is still the preferred safe haven,” said Ray Attrill, head of FX strategy at National Australia Bank, though he warned that much of the move was already priced in unless risk sentiment worsened further.

The U.S.-Iran framework agreement remained fragile, with disputes over nuclear issues and questions around the Strait of Hormuz.