Dollar is close to 19-month high: What are the reasons behind the rise?

The dollar index, which measures the value of the US Dollar against the Euro, Japanese yen and other important currencies, started the new week at high levels after a strong week.

The index decreased by 0.05 percent on the last trading day and traded at 103.17. Thus, it maintained its course close to the highest levels seen since April 2025.

EURO AND JAPANESE NEW DECLINED AGAINST THE US DOLLAR

The strengthening of the US Dollar has put pressure on other major currencies.

The Euro lost 0.1 percent of its value against the US Dollar, falling to 1.1049. Thus, it approached its lowest levels since April 2025.

While the weekly loss of the euro reached 0.8 percent, this rate is expected to indicate the sharpest weekly decline since the end of September.

The Japanese yen was traded at 159.875 against the US Dollar. Thus, the yen remained close to the lowest levels seen since the beginning of September.

The US Dollar/Yen exchange rate approaching the 160 level increased expectations that the Japanese government might intervene in the foreign exchange market.

Japanese Finance Minister Satsuki Katayama said the government would respond appropriately to exchange rate fluctuations after the yen briefly reached 160 against the US Dollar on Thursday.

THE POSSIBILITY OF FED'S 50 BASES POINT INTEREST INCREASE HAS INCREASED

Expectations that the Fed may raise interest rates at a higher rate next month were effective in the rise of the US Dollar.

US President Donald Trump's statement that his country does not need an agreement with Iran and investors' re-evaluation of their expectations regarding the Fed's monetary policy steps pushed US Treasury bond yields up.

Fed officials also warned throughout the week that inflation in the US continues to remain at high levels. Authorities gave messages that a 50 basis point interest rate increase may be on the agenda if price pressures do not ease.

According to CME FedWatch data, investors' expectations for the possibility of a 50 basis point interest rate increase next month increased from 0 percent last week to 14.5 percent.

THE SHARPEST INCREASE IN US BONDS YEARS IN 3.5 YEARS

The expectation that the Fed may increase interest rates at higher rates also had an impact on the US bond market.

Two-year U.S. Treasury yields have risen a total of 34 basis points over the last two trading days.

Thus, the yields in question recorded the sharpest two-day increase in the last 3.5 years.

The rise in bond yields has been one of the main factors supporting the strength of the US Dollar against other currencies.

MARKETS FOCUSED ON THE STATEMENTS OF FED OFFICIALS

In addition to interest rate expectations, investors also closely monitor developments in the technology sector.

The volatility in technology stocks, which is pressured by concerns about financing and regulations, affects the risk appetite in the markets.

The volatility in technology stocks following the resignation of Nvidia CEO Jensen Huang was also among the headlines followed.

Commonwealth Bank of Australia foreign exchange strategist Carol Kong stated that a harsher selling wave in the stock markets could have negative consequences for the US Dollar.

On the other hand, Kong stated that the US Dollar could maintain its strong course in the short term, and pointed out that the statements to be made by the Fed officials next week were especially important.

According to Kong, the strengthening of support for a 50 basis point interest rate increase may also increase the upward potential of the US Dollar.