The US dollar hit a 19-month high on Wednesday. Traders are betting the Federal Reserve will raise interest rates again in December.
It is a sharp reversal from 2025. In the first half of that year, the dollar fell more than 10%, its worst start to a year since 1973. Some saw that slide as a sign America was losing its financial might.
US Dollar Index (DXY) Performance. Source: TradingView
Why Is the Dollar Rising Again?
The US Dollar Index (DXY), which tracks the dollar against six major currencies, climbed to about 102.9. It was last there in April 2025.
Hot inflation lit the fuse. The Bureau of Labor Statistics said consumer prices rose 0.4% in October . Economists expected 0.3%.
That pushes the Fed toward higher rates, and higher rates draw money into the dollar. The Fed already hiked in September , its first increase since 2023.
Fed Governor Christopher Waller now wants to consider a bigger move.
“Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”
CME FedWatch puts the odds of a December 9 hike at 87%.
CME FedWatch odds for the December 9 Fed meeting, Source: CME Group
Who Pays for the Dollar’s Comeback?
Gold holders are paying first. Spot gold fell nearly 1% to $3,992.43 an ounce.
XAU/USD Price Performance. Source: TradingView
American borrowers are next. Treasury yields have already topped 5% this week , and households carry record credit card balances .
Is the Dollar Really Back?
Brown Brothers Harriman’s Elias Haddad told Reuters the dollar’s broad gains rest largely on a hawkish shift in rate expectations.
Some analysts also tie this year’s gains to safe-haven buying during the US-Israeli war on Iran.
Harvard economist Kenneth Rogoff’s warning from the 2025 slide still hangs over it.
“The dollar franchise isn’t gone, but it’s weakening materially.”
The Fed announces its decision in four weeks, on December 9.
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