US dollar hits one-year high as yen nears 40-year low

The U.S. dollar climbed to its highest level in over a year on Tuesday, June 23, as markets priced in a more aggressive Federal Reserve policy stance. The move pressured other major currencies, with the Japanese yen flirting with multi-decade lows and the euro weakening.

The dollar index, which measures the greenback against a basket of currencies, rose to 101.25, its strongest point since May 2025. Market indicators now reflect an 80% to 85% probability of a quarter-point interest rate increase by the Federal Reserve this fall. Major financial institutions, including Bank of America Global Research and Deutsche Bank, have revised their forecasts to anticipate a rate hike within the year, citing economic resilience.

Analysts said the dollar was drawing strength from both monetary policy expectations and geopolitical uncertainty. Tommy von Bromsen, an FX strategist at Handelsbanken, noted the currency is pricing in higher rates and receiving support from unresolved conflicts in the Middle East.

The Japanese yen, meanwhile, briefly weakened to 161.93 against the dollar late on Monday, approaching a level that would mark its weakest point since 1986. The currency's persistent...