US Dollar Index (DXY) tops 103.00 to reach highest since April 2025 amid Fed bets and Iran risks

• Hot US inflation figures fuel further DXY gains as expectations of Fed rate rises strengthen.
• A persistent geopolitical risk premium stemming from the US-Iran standoff underpins the USD.
• Further gains remain the most likely direction, according to the fundamental backdrop.

At its highest level since April 2025 during Thursday’s Asian session, the US Dollar Index (DXY) is drawing bullish interest in a further advance beyond 103.00. The index measures the greenback against a basket of currencies.

October’s stronger-than-forecast US consumer inflation figures prompted a more hawkish stance from several Federal Reserve (Fed) officials, reinforcing market expectations of additional policy tightening. Traders have also begun to factor in the prospect of an outsized 50-basis-point (bps) Fed rate increase in December. Against that backdrop, the benchmark 10-year US government bond yield moved back above 5% on Wednesday, a development seen as a major source of support for the DXY.

Dollar gains support as Waller’s hawkish shift reinforces Fed tightening bets

A 9/10 FXS Speechtracker score, markedly above the historical average of 7.3/10, highlighted the more hawkish message from the Fed’s Waller and his clear preference for further tightening. His conditional willingness to consider a half-point rate rise in December if core CPI comes in at 0.3% or higher, coupled with backing for at least a quarter-point increase even if the data improve, points to a forceful policy response to persistent inflation and widespread price pressures. Waller’s emphasis on policy being less restrictive than previously believed, and on the need for real rates to increase to preserve that restraint, further underlines upside risks for US yields and the dollar.

An increase of 3.17 points took the FXS Fed Sentiment Index to 145.50, placing it further into hawkish territory above the neutral threshold of 100 and in line with the high FXS Speechtracker score. Taken together, the stronger hawkish index reading and speech tone above its historical baseline suggest that markets should assign a greater probability to further Fed rate increases. That could lend support to the dollar against the euro and yen.

Geopolitical risk, meanwhile, continues to command a premium as the US-Iran standoff over the Strait of Hormuz persists and the US carries out fresh strikes on Iran’s Qeshm Island. Iran has also attacked ship navigation systems on Didamar, an Omani island at the entrance to the Persian Gulf. Iranian Armed Forces Deputy Chief of Staff Brigadier General Kioumars Heidari added that the strategic waterway would remain closed unless the leader of the revolution ordered it to reopen.

With these developments dampening hopes of a diplomatic settlement to the US-Iran conflict, safe-haven demand is providing another prop for the US Dollar (USD). The balance therefore continues to favour further DXY gains. Attention now turns to the weekly Initial Jobless Claims release. Together with speeches by influential FOMC members and further geopolitical headlines, the figures should give the index some meaningful impetus.

DXY advances on the 4-hour chart

Technical outlook favours further gains

After breaking through horizontal resistance at 102.40-102.50 the previous day, the DXY continues to show a bullish near-term bias. Prices also remain comfortably above the 200-period Exponential Moving Average (EMA) on the 4-hour chart, adding to the positive tone. Should a meaningful correction develop, initial support could emerge near 101.55 at the 200-period EMA, where buyers would be expected to protect the broader uptrend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)