This week, the U.S. dollar hit its highest mark on the DXY in over a year. That’s the index that measures the greenback against a basket of foreign currencies. The dollar’s up about 5% since dipping to a recent low in late January, before the war in the Middle East started. And it’s been rising in fits and starts ever since.The dollar’s recent rise is mainly driven by differential economic growth and interest rate expectations between the U.S. and other big economies. U.S. economic data has been strong recently, and consumers continue to spend it up. The Federal Reserve is responding as expected, said Jonas Goltermann, chief markets economist at Capital Economics: “They’ve stopped talking about cutting interest rates, and they’ve started talking about hiking interest rates.” Meanwhile, Europe, the U.K., and other developed economies are hurting more from the spike in energy prices and can’t afford to hike interest rates without squelching growth. “And so that differential moves in favor of the U.S., and the dollar strengthens,” Goltermann said.But one thing this dollar-strengthening is not, argued Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics, is investors fleeing to safety in troubled times. “This is not a safe-haven play,” he said. “The April 2025 Liberation Day tariffs, coupled with all the anti-foreigner rhetoric, has really dented the safe-haven attractiveness of the dollar.” Gagnon said what’s going on here is just the heightened lure of U.S. interest rates and dollar-valued assets, plus the underlying pull of our big (and relatively strong) economy. “Investors just love U.S. financial assets,” Gagnon said — which keeps the dollar strong.