The US dollar just hit its highest level in over a year, and crypto markets are feeling every bit of it.
The dollar index (DXY) climbed to a 13-month high on June 24, driven by a combination of renewed Federal Reserve rate-hike speculation and a broad selloff in tech stocks that sent investors scrambling toward safe-haven assets. Bitcoin, meanwhile, has been trading below $65,000 in mid-June.
What’s driving the dollar higher
The Federal Reserve held its benchmark rate steady at 3.75% following the June 17 FOMC meeting. According to the CME FedWatch tool, traders are now pricing in roughly 32% odds of a 25 basis point hike at the July 29 FOMC meeting. Just weeks ago, the dominant narrative was about potential rate cuts later this year.
Futures markets are suggesting the fed funds rate could drift up to approximately 3.9% by October, which would mark the first increase since the Fed’s aggressive tightening cycle that dominated 2022 and 2023. The catalyst behind this shift is inflation that simply won’t cooperate, particularly on the energy side. Oil prices have been stubbornly elevated, feeding through to broader consumer price metrics and giving Fed officials reason to keep their hawkish options open.
